dmertz
Level 15

Retirement tax questions

Because your distributions are now qualified distributions, your tax return is not to include Part III.  That makes any instruction for line 19 meaningless to you.

 

I think that your understanding is generally correct.  Until a Roth 401(k) is qualified (5-year and age qualifications met), distributions are a proportionate mix of nontaxable and taxable amounts because there are no distribution ordering rules like the ones for a Roth IRA.  However, if one is already eligible for qualified distributions from a Roth IRA and that person is eligible to take a distribution from the Roth 401(k), that person could roll funds from the Roth 401(k) over to a Roth IRA and then take a Roth IRA distribution to take advantage of the fact that distributions from the Roth IRA are qualified distributions, tax free.  That's one reason I always suggest that a person establish a Roth IRA before age 55 if they can, just to get the Roth IRA qualification clock running.

 

If you have no basis in nondeductible traditional IRA contributions, there is no benefit to rolling traditional 401(k) funds first to a traditional IRA and then doing a Roth conversion compared to simply taxably rolling the traditional 401(k) funds directly to a Roth IRA.

 

Regarding tracking Roth conversions, that's done by year.  If you have met the requirements for qualified distributions, there is no need to know anything about the amount and timing of any past (or future) Roth conversions.

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