topic Roth Conversion with IRA basis followed by IRA Rollover in Get your taxes done using TurboTax

Roth Conversion with IRA basis followed by IRA Rollover

John-GA — Mon, 03 Feb 2025 18:42:24 GMT

I retired last year. Earlier in the year, prior to retirement, I took the funds in my Traditional IRA ($20,000) and converted them to a Roth IRA. The IRA basis for those funds is $6,600 (based on previousl 8606s). Once I retired, I rolled my Traitional 401(k) into the now empty Traditional IRA. The amount of the rollover significantly exceeded the $20,000. I then converted $53,000 of the 401(k) based Traditional IRA funds to a Roth IRA.

Here's my question. The $6,600 is directly related to the initial $20,000 I converted. However, TurboTax asks what the value is of all of my Traditional IRA funds as of Dec 31, 2024 on the screen that follows the IRA basis. The amount I enters determines how much the $6,600 is deductable for last year. Can I enter $0 since the $20,000 is no longer in a Traditional IRA? Or do I have to include the Traditional 401(k) IRA funds that I rolled over that now sit in my Traiditional IRA in the total?

Re: Roth Conversion with IRA basis followed by IRA Rollover

DanaB27 — Sat, 08 Feb 2025 16:01:17 GMT

No, you cannot enter $0, you need to enter the value of all your traditional/SEP/SIMPLE IRAs on December 31, 2024. This includes the 401k funds that are now in your traditional IRA. Since you had pre-tax funds from your 401k rollover in your traditional IRA the pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part.

Re: Roth Conversion with IRA basis followed by IRA Rollover

dmertz — Fri, 07 Feb 2025 14:45:43 GMT

The pro rata calculation of your Roth conversion(s) does not depend on the relative timing of the conversion and rollover transactions. The Roth conversions are essentially treated as having occurred on December 31. The result of rolling over the 401(k) to a traditional IRA has made your Roth conversion largely taxable, with a large portion of your basis in nondeductible traditional IRA contributions remaining with your traditional IRAs (line 14 of Form 8606) to be applied proportionally to future traditional IRA distributions.