dmertz
Level 15

Retirement tax questions

These rollovers do not change your basis in traditional IRA contributions if you had no after-tax money in your 401(k) or pension plan.  After-tax money in the 401(k) could have resulted from continuing to pay off a 401(k) loan after you had defaulted on the loan and because a deemed distribution (code L on Form 1099-R) or in either plan if you made after-tax contributions to the 401(k) or to the pension plan (which some plans permit).

 

If you did roll over to a traditional IRA any after-tax basis from the 401(k) or pension plan, you needed to provide an adjustment to the basis shown on line 2 of the next Form 8606 you were required to file after the rollover occurred, along with explanation of the adjustment.  If you did not do that, that Form 8606 and all that followed were incorrect.

 

Of course the year-end balance in the IRAs that received these rollovers must be included on line 6 of Form 8606, but your question was about the basis.

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