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Level 1
posted Mar 17, 2021 3:39:59 PM

Tax Liability

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?

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1 Best answer
Level 15
Mar 17, 2021 3:51:10 PM

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

5 Replies
Level 15
Mar 17, 2021 3:51:10 PM

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
Mar 17, 2021 4:29:18 PM

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
Mar 17, 2021 4:45:59 PM

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.

Level 15
Mar 17, 2021 7:59:40 PM

If JUSTLIKEKNOT's Roth IRA(s) consist only of this converted amount and earnings, and is under age 59½, taking $30,000 out of the Roth IRA would result in a $3,000 early-distribution penalty.

Level 15
Mar 18, 2021 7:13:22 AM

He did not say the converted amount, nor how much he contributed to his 401K