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401-K Rollover involving pre-tax and Roth money to a self-directed conventional and Roth IRA

This is a 2-part question.  I think I have the answer to the first part, but want to confirm. 

My employer allows pre-tax and after-tax contributions to my 401-K.  I maxed out the before and after-tax contributions in 2023.  Since I'm over 59 1/2, I rolled over as much of my 401-K as I could to a self-directed IRA.  My employer also allows in-service distributions of the after-tax money.

 

I received a 1099-R from Fidelity that reported both the pre-tax and Roth rollovers on the same form.   In a prior tax year, I did similar rollover and was told to separate the transactions in Turbotax by inputting one 1099-R as the pre-tax (subtract Box 5 from Box 1 to get the correct amount) and selecting Code G (and putting nothing in Box 5).  The second would have Box 1 and Box 5 show the value in Box 5, also with a Code G.

 

I am then asked two questions:   Is this money reporting a roll-over of funds from a 401-K or 403(b) account to a designated Roth 401-K.  I answer "NO" because it is going to a self-directed IRA or Roth IRA.

 

The next question is "Was this money rolled over to a Roth IRA?".  For the pre-tax money, I answer "NO".  But what is the correct answer for the post-tax money in my company savings plan?  I believe the last time this came up, I was told also to select "NO" for the Roth rollover.

 

I max out the IRS allowed maximum in my company savings plan.  I also contribute the maximum amount to a Roth IRA.  I enter that information in a separate section.

 

So how should I answer the two rollover questions when rolling post-tax money to a Roth?  Answering "NO" doesn't feel right.

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Accepted Solutions
dmertz
Level 15

401-K Rollover involving pre-tax and Roth money to a self-directed conventional and Roth IRA

The fact that these rollovers went to separate Roth accounts is irrelevant.  All of your Roth accounts are treated as one combined account for tax purposes.

 

Yes, you can combined these Roth IRAs into one.  You must do this by nonreportable trustee-to-trustee transfer, not by distribution and rollover, otherwise you would violate the one-rollover-per-12-months limitation.

 

Because you are over age 59½, if the first regular Roth IRA contribution you made, if any, was for some year prior to 2020 or your first rollover deposit into a Roth IRA occurred before 2020, any distribution that you make from any of your Roth IRAs is a qualified distribution, no tax or penalty.

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5 Replies
dmertz
Level 15

401-K Rollover involving pre-tax and Roth money to a self-directed conventional and Roth IRA

"I rolled over as much of my 401-K as I could to a self-directed IRA."

 

It's not clear that any Roth money is involved.  You appear to have said that you rolled the entire amount reported on this Form 1099-R over to a traditional IRA, so if that's the case, there is no need to split the Form 1099-R into two.  Splitting the Form 1099-R is only appropriate if portions of the distribution went to different types of retirement accounts.  IF the entire distribution was rolled over to a traditional IRA, your after-tax basis from the traditional 401(k) has become basis in nondeductible traditional IRA contributions in your traditional IRAs.

 

If, despite what you have described, you actually did roll the after-tax portion of the distribution from the 401(k) directly to a Roth IRA, then splitting of the Form 1099-R is necessary so that you can answer Yes when asked if that portion was rolled over to a Roth IRA.

401-K Rollover involving pre-tax and Roth money to a self-directed conventional and Roth IRA

I rolled over  my pre-tax money into a conventional IRA and the after-tax money into a Roth account.  It bothered me that Fidelity didn't separate it and generate two 1099-Rs, it would have been less confusing.

dmertz
Level 15

401-K Rollover involving pre-tax and Roth money to a self-directed conventional and Roth IRA

OK, then just answer Yes when asked during the entry of the Form 1099-R for the portion rolled over to a Roth IRA if it was rolled over to a Roth IRA.  The effect of answering Yes causes TurboTax to add this portion to your basis for nontaxable Roth conversions for 2023 for Roth IRA basis tracking purposes in case you even make a nonqualified distribution from your Roth IRAs..

401-K Rollover involving pre-tax and Roth money to a self-directed conventional and Roth IRA

Thanks.

 

This leads to more questions regarding a Roth IRA.  Right now I have four different Roth IRAs.  I have the original IRA I started back in the mid-2000s (account 1).  My employer at the time offered allowed after-tax contributions to a 401-K, and when I was laid off I rolled the before tax contributions to a pre-tax 401-K and the after-tax contributions to a Roth (account 2).  My new employer allowed before and after-tax contributions to their 401-K.  This new (and current) employer allowed in-service distributions, so I rolled the after-tax contributions to a Roth (Account 3) .  Then two years ago, my current employer began offering a Roth 401-K as well as a conventional.  I split my money between Roth and conventional 401-Ks.  This year I rolled my Roth 401-K money into a Roth IRA (account 4).

 

I don't know why Fidelity opened a new account for the Roth 401-K money, rather than rolling it into the Roth IRA account that had the after-tax company savings plan money.  Was it for keeping the basis separate?  

 

I would like to combine all four accounts into a Roth?  Can I do that?  If so, what would be considered the start date for the 5 year rule?  Account 1 was started close to 20 years ago, one is almost 5 years old, the other two are one and two years old.

 

I'm 67 and my wife wants us to consider having a professional manage out accounts.  

dmertz
Level 15

401-K Rollover involving pre-tax and Roth money to a self-directed conventional and Roth IRA

The fact that these rollovers went to separate Roth accounts is irrelevant.  All of your Roth accounts are treated as one combined account for tax purposes.

 

Yes, you can combined these Roth IRAs into one.  You must do this by nonreportable trustee-to-trustee transfer, not by distribution and rollover, otherwise you would violate the one-rollover-per-12-months limitation.

 

Because you are over age 59½, if the first regular Roth IRA contribution you made, if any, was for some year prior to 2020 or your first rollover deposit into a Roth IRA occurred before 2020, any distribution that you make from any of your Roth IRAs is a qualified distribution, no tax or penalty.

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