Erroneous transfer of funds from Roth 401k to Traditional IRA

[pistolpetervern]

I accidentally rolled over my Roth 401k into a different institutions Traditional IRA in the Summer of 2020. How do I go about fixing this to avoid paying taxes on my money twice?

[pedz]

On your 2020 tax return, the converted new IRA should have caused a tax deduction since you contributed taxed income to a traditional IRA.  The money in the new traditional IRA is now untaxed.  If you forgot to take this deduction, then I guess file an amended 2020 return.  If you ended up contributing too much to your traditional IRAs in 2020, I think you just lose but I'm not sure.

Investopedia has some info as well.

[Opus 17]

@macuser_22 

Generally, if you put non-deductible money into a traditional IRA, that is tracked on form 8606.  Then when you make withdrawals, part of the withdrawal will be tax-free, based on the proportion of taxed money in the account.  If you don't have form 8606 on your 2020 return, you need to file an amended 2020 return to report the rollover. 

[macuser_22]

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@pistolpetervern wrote:

I accidentally rolled over my Roth 401k into a different institutions Traditional IRA in the Summer of 2020. How do I go about fixing this to avoid paying taxes on my money twice?

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You have  real problem now.      While you can convert a Traditional IRA to a Roth it is not permitted to convert a Roth to a Traditional IRA.     That would be a excess contribution in the Traditional IRA.  Unfortunately the  ability to get a tax free "return of contribution" for a 2020 transaction expired Oct 15, 2021.    It still must be removed, but only with a normal distribution.

If the movement of funds was a direct trustee-to-trustee transfer between the two custodians then they never should have allowed it to tale place.  You might have a cause of action against one of both custodians if this was their error.

If you just take the money out yourself at this late date, it will be fully taxable.

I suggest that you seek professional help from a tax professional in your area or tax attorney that specializes in retirement accounts.