I contributed 2018 and 2019 after-tax contributions to an existing rollover IRA. I wanted to see about moving those funds to another Traditional IRA so I can do a Roth conversion and move the rollover IRA back to an ER plan so I can avoid taxes on the conversion. Is there a formula or method to move the after tax amount safely to a seperate IRA?
You'll need to sign in or create an account to connect with an expert.
For tax purposes you only have one Traditional IRA which is the aggravate total of all existing IRA's so there is no reason to move any money to another account. You cannot remove only the after tax money. Any distribution is a mix of before and after tax money.
You can NEVER withdraw ONLY the nondeductible part - it must be prorated over the entire value of ALL Traditional IRA accounts which include SEP and SIMPLE IRA's. (For tax purposes you only have ONE Traditional IRA which can be split between as many different accounts as you want, but for tax purposes they are all added together). For example using rough figures: if you had $60K of nondeductible contributions in an IRA with a total value of $600K (10:1 ratio), then when you take a $60K distribution from any IRA account $6,000 would be nontaxable and $54,000 would be taxable (same 10:1 ratio) , with the remaining $54K of basis staying in the IRA for future distributions. As long as there is any money in the IRA, there will be some basis. TurboTax will ask for your non-deductible "basis" and then the *Total Value* of *all* Traditional IRA, SEP and SIMPLE accounts as of Dec 31, of the tax year. That is so the prorating of the basis can be properly proportioned between the current years distribution and the remaining IRA value. That is done on the 8606 form. |
What you might be able to do is roll the before tax money to a company 401(k) plan leaving only the after-tax money in the IRA which can then be converted to a Roth tax free. Only before tax money can be rolled into a 401(k) plan - the after tax money is left behind.
Not all 401(k) plans allow such a rollover and those that do might only allow into a new 401(k) for new employees and not allow new rollovers into an existing 401(k) plan. That depends on the terms of the plan that your employer has. If this is not done correctly and the total year end value of ALL existing Traditional, SEP and SIMPLE IRA accounts are not zero, then the Roth conversion will be partly or mostly taxable.
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
llpiii
New Member
jl_brooks
Level 1
tocguy
Level 3
sunshineInTheRain
Level 3
rocba62-
New Member
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.