With a traditional 401k to roth ira conversion (traditional 401k rollover from old employer--> traditional ira --> roth ira), am I taxed right away or at tax time?

[VolvoGirl · Accepted solution]

They will take out withholding like from your paychecks but the actual tax is on your tax return.  You enter the full gross amount as income and it may push you into a higher tax bracket then the withholding is subtracted leaving you with a refund or tax due.

You should get two 1099R for it.  The rollover from the 401K is not taxable but the Traditional IRA to ROTH will be taxable.

[jacobgolladay]

Thank you!

[dmertz]

If the rollover from the 401(k) to the traditional IRA is done by direct rollover, tax withholding is not required.  Tax withholding on the Roth conversion can also be declined.  With no tax withholding, you might have to make timely estimated tax payments to avoid an underpayment penalty.

If your intent is to end up with some or all of money in a Roth IRA, it's generally better to do a taxable rollover of that portion directly from the traditional 401(k) to the Roth IRA, particularly if there is any after tax basis in the traditional 401(k) account and you already have other money in traditional IRAs.  The 401(k) plan is required by law to permit a rollover directly to a Roth IRA.

The 401(k) plan is required by law to provide you with all of this rollover information between 30 and 180 days prior to making the distribution unless you waive the 30-day period.

<a rel="nofollow" target="_blank" href="https://www.irs.gov/retirement-plans/retirement-plan-participant-notices-distributions">https://www....>

[jacobgolladay]

This is perfect, thank you!