Traditional IRA Rollovers

Forum|Forum|5 years ago
February 10, 2021
1 reply
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Here is how I understand it if you want to rollover non-deductible traditional IRA contributions into a Roth account for high-income earners. This works fine without penalties if you do not own any IRA accounts with deductible contributions in them. I have an IRA that consists of SEP contributions and non-deductible IRA contributions over the yrs. To my understanding, I can't simply open up a new IRA and contribute to the IRA and then convert that to a ROTH without paying tax on a %. I read you can convert the IRA to a 401K, which the IRS doesn't include those balances in computing your penalty when rolling over your traditional IRA to Roth. So how do you rollover your traditional IRA to a 401K when part of ira balance consists of nondeductible contributions? And if you can, then what is left would be the nondeductible IRA contributions and you rollover all of it to a roth without any extra tax, but gets to come out tax-free in retirement. It's starting to sound like I can't take advantage of this loophole.

gloriah5200

Level 10

When you distribute or rollover monies from a tradtitional IRA, Form 8606 allocates the non-deductible IRA basis to all traditional IRA balances so that in order to use all the non-deductible IRA basis you would have to liquidate or roll-over all traditional IRA account balances.

CurtisStevensAuthor

Level 3

Are you basically saying I can't just rollover the SEP contributions, it's all or nothing? Am I correct, that I can't just open up a 2nd IRA account, contribute to that and just rollover those funds to a Roth?

Curtis

gloriah5200

Level 10

When you rollover part of a contribution to a traditional IRA account that has a nondeductible IRA contribution basis, then that portion will be allocated a portion of the nondeductible IRA basis from the traditional IRA account but not all of the nondeductible traditional IRA basis unless the entire account is liquidated.