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401k distribution

In 2011 I rolled a previous employers 401k  directly into an IRA. The total amount included an after-tax amount. Given the new Guidance on allocation of After-Tax amounts to rollovers, and Notice 2014-54 and Transition Rules for distributions prior to September 18, 2014,  Can I now rollover the after tax amount into a Roth IRA??

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3 Replies

401k distribution

The notice you referenced allows the 401K to split the distribution/rollover into separate accounts so the after tax amount can go directly to the ROTH and the pre tax to the Trad IRA ... however if you did not take advantage of that option when you converted the 401K to the IRA  then a form 8606 should have been completed at that time and any future distributions must be taken out as a ratio of taxable/non taxable using the 8606 form to compute those parts ... you cannot just take out the after tax contributions by themselves.  

401k distribution

Unfortunately, no.

 

You could have rolled the before tax 401(k) money to the Traditional IRA and the after-tax money to a Roth.  If it was all put into the Traditional IRA  then it becomes part of the after-tax "basis" in that IRA and can never be removed by itself, but must be prorated between any distributed and the remaining total value of the IRA.

 

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

401k distribution


@Critter wrote:

The notice you referenced allows the 401K to split the distribution/rollover into separate accounts so the after tax amount can go directly to the ROTH and the pre tax to the Trad IRA ... however if you did not take advantage of that option when you converted the 401K to the IRA  then a form 8606 should have been completed at that time and any future distributions must be taken out as a ratio of taxable/non taxable using the 8606 form to compute those parts ... you cannot just take out the after tax contributions by themselves.  


A 8606 form is not required for a 401(K) rollover.    The first time a distribution is taken from the Traditional  IRA a 8606 form will be required to report the basis added by the 401(k) rollover with an explanation statement  for the adjusted basis that TurboTax will ask for in the 1099-R interview for the distribution.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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