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Tax Liability

5 replies
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I lost my job in 2020, I was given the wrong advise on what to do with my 401K. It was rolled over into a Roth IRA instead of a traditional IRA. Now I owe over $30,000.00 in taxes. Is there anything I can do?

TurboTax Basic Windows

dmertzAnswer

Level 15

There is nothing you can do to eliminate this taxable income from your 2020 tax return. The changes to the tax code made by the SECURE Act make such a taxable rollover irrevocable.

You might be able to establish a payment plan with the IRS if you are unable to pay the tax bill:

https://www.irs.gov/payments/payment-plans-installment-agreements

dmertzAnswer

Level 15

There is nothing you can do to eliminate this taxable income from your 2020 tax return. The changes to the tax code made by the SECURE Act make such a taxable rollover irrevocable.

You might be able to establish a payment plan with the IRS if you are unable to pay the tax bill:

https://www.irs.gov/payments/payment-plans-installment-agreements

Level 15

You can take $30,000, or less, out of your Roth IRA to pay your tax.

After subtracting your total contributions, penalty on early withdrawal of Roth earnings is another 10%.

Contributions come out first, then earnings if any.

Level 15

Put your Roth money into a Self-directed Roth IRA brokerage account.

Invest carefully.

You will come out ahead in the long run,

and you will be thanking that advisor.