Basis in nondeductible traditional IRA contributions is not permitted to be rolled over to a 401(k). Only pre-tax amounts are permitted to be rolled over to a 401(k). Your options are
- Get the 401(k) to make a corrective distribution of the basis from the 401(k). You could then perhaps do a late rollover of that amount to a Roth IRA as a conversion under IRS Revenue Procedure 2020-47, amend your 2023 tax return to reflect that Roth conversion (two Roth conversions in 2023), eliminating the carryforward of the basis or,
- Same as #1 except do the late rollover to a traditional IRA, perhaps avoiding the need to amend the 2023 tax return or,
- Ignore the mistake, correct the basis carried forward to your 2025 tax return be $0 and pay tax again on this amount when eventually distributed from the 401(k). (Mistakenly rolling basis over to the 401(k) does not create after-tax basis in the 401(k).) Or,
- Retain the basis carried forward and, when you are eligible to take distributions from the 401(k), do an ordinary rollover from the 401(k) to a traditional IRA. However, I don't know that this would pass scrutiny under an IRS audit. When you rolled the finds to the 401(k) you effectively certified that it contained no after-tax basis, so this would seem to mean that you gave up that basis.
Given that the mistake was made in 2023, you might have a tough time getting the 401(k) plan to make a distribution now and #3 might be your only viable option.
