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JUSTLIKEKNOT
Level 1

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?

1 Best answer

Accepted Solutions
dmertz
Level 15

Tax Liability

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

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5 Replies
dmertz
Level 15

Tax Liability

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

fanfare
Level 15

Tax Liability

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.

fanfare
Level 15

Tax Liability

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.

dmertz
Level 15

Tax Liability

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.

fanfare
Level 15

Tax Liability

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

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