Roth 401k rollover to Roth IRA then withdraw from Roth IRA

[Icey101]

Where do I annotate a older roller in Turbo Tax. I can not find where I enter my 2021 Roth 401K to Roth IRA rollover. I rolled over $34k (of which $24k was contribution) to my Roth IRA. The Roth 401k was opened in 2016 and transfer was 2021, fullfilling that 5 year rule. The Roth IRA was opened in 2008, so fullfilling that 5 year rule. I took a with draw of $34k against the roth IRA in 2023 but can not find anyplace to annotate a $34k roll over into the account (it was shown on my 2021 taxes).

[dmertz · Accepted solution]

Satisfying either of these 5-year rules is irrelevant if at the time of the distribution from the Roth IRA you were under age 59½.  Otherwise, the distribution from the Roth IRA is a qualified distribution and there is no need to know your contribution basis because a qualified distribution is automatically free of tax an penalty.

Assuming that you were under age 59½ at the time of the distribution from the Roth IRA, your $24,000 of contribution basis in the Roth 401(k) became contribution basis in the Roth IRA.  Be sure to click the Continue button on the page that lists the Forms 1099-R that you have entered and, when asked, enter or confirm your Roth IRA contribution basis (including the contribution basis from the Roth 401(k)).

[Icey101]

On my 2021 return it shows the $24k contribution ($34k total rollover), so I should change the box that asks the total life contribtion to include this $24k along with Roth IRA contribtutions? Yes I am under 59.5.

[dmertz]

"I should change the box that asks the total life contribtion to include this $24k along with Roth IRA contribtutions?"

Yes.

[taxnovice16]

I have a similar question. In 2022 I rolled over my Roth 401k into a Roth IRA and I also rolled over my 401k in to Traditional IRA.  It looks like I never submitted the 1099-R forms in my 2022 tax filing, although I do have copies of the 1099-R forms on my computer.  There are no other contributions in the Roth IRA and Traditional IRA other than what I moved over.

In 2023 I withdrew some funds from my Roth IRA (I am in m 30s btw).  This amount is less than what I contributed to my Roth 401k (the number in box 5).

Do I need to amend my 2022 tax forms to include the 1099-R forms from when I rolled over the 401ks?  Or can I just enter the amount from box 5 of my 1099-R from the Roth 401k as the "Roth Contributions Prior to 2023" and be done with it?

Thank you

Edit:

For clarity my 2022 1099-R from Roth 401k has Distribution Code H in Box 7 (though this form was not included in 2022 tax return)
My 2023 1099-R from Roth IRA has Distribution Code J in Box 7

[dmertz]

Both of the rollovers from the 401(k) in 2022 were nontaxable, so there probably isn't much reason to amend the 2022 tax return at this point.  I would just enter as "Roth Contributions Prior to 2023" the amount from box 5 of the 2022 Form 1099-R that reports the distribution from the Roth 401k and be done with it.

[taxnovice16]

Thank you! And thank you for the super fast reply!

[VVRR22]

My apologies for reviving this old thread but it seems to hit my question on the head and want to confirm. 

Any Roth Contributions (Not earnings) whether 401k or IRA or 401k rolled into IRA are all available to be withdraw without any penalty or taxes? 

From what I read, I can clearly deduce that earnings have the 59.5 age, the 5 year waiting period. However, when it comes to the Roth 401k converted contributions, I have found multiple conflicting standpoints on taxes and the 5 year 10% penalty.

[dmertz]

"Any Roth Contributions (Not earnings) whether 401k or IRA or 401k rolled into IRA are all available to be withdraw without any penalty or taxes?"

It depends.

If you have met that age 59½ and 5-year requirements for qualified Roth IRA distributions, any regular (and there for normal) distribution from your Roth IRAs are free of tax and penalty.

If you have not reached age 59½, the amounts of your contributions, conversion and earnings in your Roth 401(k) retain the same nature and add to the corresponding amounts in your Roth IRAs.

If you have met the age 59½ and 5-year requirements for qualified distributions from the Roth 401(k) but have not yet met the 5-year requirement for qualified distributions from your Roth IRAs, the entire amount rolled over to the Roth IRA from the Roth 401(k) becomes contribution basis in your Roth IRAs.  In this case, only earnings accrued in your Roth IRAs would be subject to taxes, but not penalty, if distributed before you become eligible for qualified distributions from your Roth IRAs.  These earnings come out last.

[VVRR22]

So if I had original 2k of contributions in my roth ira, then rolled over 27k of contributions  from roth 401k plus 16k of earnings for a total of 33k in total rollover value. Does that mean even if I'm not 59.5 and the account is not 5 years old I can pull up to 29k with no penalties or taxes as those contributions were after taxes? Or what applies to the 29k im still unclear...

[dmertz]

The rollover to the Roth IRA of the entire balance of the Roth 401(k) would give you a total of $29k of contribution basis in the Roth IRA because the $2k of contribution basis from the Roth 401(k) adds to the contribution basis already in the Roth IRA.  Under the Roth IRA ordering rules for distributions, contribution basis comes out from the Roth IRA first, free of tax and penalty.

[VVRR22]

So to conclude, I have 29k I can withdraw with any penalty or taxes even thought the account is not 5 years old and Im not 59.5? Those only apply for the earnings? The reason I ask is because I may have to buy a roof soon as my insurance only covering repairs not replacement and it's going to be from 10k to 15k. 

[dmertz]

"I have 29k I can withdraw with any penalty or taxes even thought the account is not 5 years old and Im not 59.5?"

Without penalty or taxes.  Because this will not be a qualified distribution, the distribution will need to be reported on Form 8606 Part III to calculate that the taxable amount is zero.

"Those only apply for the earnings?"

What are "those," tax and penalty?  If you are under age 59½, the earnings (either those earned in the Roth IRA or those rolled over from the Roth 401(k)), come out of your Roth IRAs last under the Roth IRA ordering rules for distributions and are subject to income tax and, generally, a 10% early-distribution penalty.  If your distribution is less than your basis in Roth IRA contributions, you won't be taking out any taxable earnings.

[VVRR22]

Correct and correct! Thank you so very much for clarying this for me it was a nightmare looking this up online and trying to get the roth 401k contribution clarified once they turned into the roth ira. I could only find contributions that were made directly into the roth ira! What's your current experience and background if I may ask?

[dmertz]

Because it's possible to make irrecoverable mistakes related to retirement savings, I've spent many years of reading the tax code and IRS forms, instructions, Notices, Revenue Rulings, Revenue Procedures, Treasury Decisions and Written Determinations related to retirement savings so that I know where to find the answers needed to avoid making such mistakes with my own retirement savings.  All of this information is available on the internet.

In your case, the answers to what happens with rollovers from a Roth 401(k) to a Roth IRA are in IRS Treasury Decision 9324 and in the safe-harbor explanation created by the IRS that the 401(k) plan can use provide the required explanation to the individual prior to making the distribution from the Roth 401(k) account.  The safe-harbor explanation is given in IRS Notice 2020-62.