401K rollover to IRA after Roth conversion

[pharmerron]

I have converted a traditional IRA of approximately $68k with $45k being non-deductible contributions to a Roth IRA. I currently have no other IRA's. If I rollover $800k from a 401k afterwards, but in the same calendar year, does this affect the taxes owed on the Roth conversion? 

[dmertz]

Absolutely. I'll assume that the Roth conversion was done in 2019.  The rollover of the 401(k) will make the Roth conversion mostly taxable in 2019 since it would greatly increase the amount of your traditional IRA year-end balance includible on Form 8606 line 6 for the calculation of the taxable and nontaxable proportions of the Roth conversion.

Assuming that you have no other money in traditional IRAs, that the 401(k) contains no after-tax basis and you make no other IRA distributions in 2019, with the 401(k) not rolled over in the same year the taxable amount of the Roth conversion would be $23,000.  If the 401(k) is rolled over to a traditional IRA in the same year, the nontaxable amount of the Roth conversion would be:

$68,000 * $45,000 / ($800,000 + $68,000) = $3,525

The remaining $64,475 would be taxable, leaving $41,475 of basis in your traditional IRAs to be applied to future IRA distributions.

[pharmerron]

thank you for confirming my thoughts