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Retirement tax questions
There is no penalty as long as you deposited the total amount of your 401(k) distribution (including any taxes withheld) into your Roth IRA in no more than 60 days. Failing to complete the rollover within that time period renders the distribution ineligible for a rollover. If you had money withheld from the distribution for income taxes, you must supplement the amount you received to make sure the entire amount requested gets rolled over.
You must include the amount of your 401k plan rollover to your Roth IRA as part of your taxable income because you are moving the money from a pretax account, the 401k plan, to an after-tax account, the Roth IRA. You must complete Form 8606 to determine the taxable portion, which will be the entire amount unless you made nondeductible contributions to your 401k plan. Report the total amount of the rollover as a nontaxable pension and annuity distribution and the taxable portion as a taxable pension and annuity distribution.Money that you roll into a Roth IRA from a 401k plan must remain in the Roth IRA for at least five years before you qualify to take penalty-free distributions, even if you turn 59 1/2 before that. This time requirement applies separately to each rollover.
May 31, 2019
5:09 PM