Join Early Retirement Today
Reply
 
Thread Tools Display Modes
403b rollover to Roth IRA - Tax Preparation
Old 01-26-2016, 10:34 AM   #1
Recycles dryer sheets
 
Join Date: Feb 2011
Location: Nottingham
Posts: 212
403b rollover to Roth IRA - Tax Preparation

Morning -

We rolled over a small portion of my DW's 403b to a Roth IRA.

We are awaiting a 1099-R form but I wanted to get a heads start on my TY15 taxes.

Since money went from a pre-tax 403b to a Roth IRA I understand that the entire amount of the rollover is taxable.

From a tax standpoint, was hoping anyone online who has done the same could provide some hints. Here is what I think I know what to do:

1) the entire rollover is added to the taxable Pension line 16a and 16b. In other words my overall taxable income will go up by the full amount of the rollover.

2) Do I need to complete Part 1 Form 8606 and part II. This is where I am confused cause this form talks IRAs and not 403/401. And the form says to put numbers on Line 15a and b.

Was hoping someone online here has already done this.

Thanks

kannon
kannon is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-26-2016, 04:27 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 4,172
Interesting question........wasn't sure so I asked. Sounds like you
just do line 16a, b on the 1040 and no F8606.
Fairmark Forum :: Retirement Savings and Benefits :: Conversion from 401K/403B to Roth IRA

You might want to make a note to yourself to document the Roth conversion so if you take an early distribution from the Roth , you'll have the info you need to
do your taxes......date, amount and the fact that it is a conversion.
kaneohe is offline   Reply With Quote
Old 01-26-2016, 04:52 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 10,252
These conversions with virtually no reporting except throwing some numbers on Form 1040 probably all benefit from a statement added to your tax return.

The instructions for Form 8606 talk about these extra statements and how to word them. I would probably add such a statement to my return even if I didn't have to file Form 8606 for other reasons.

This is from the instructions to Form 8606, but may not apply here:
Quote:
You do not file Form 8606. You attach a statement to Form 1040 explaining that (a) you made a rollover of $50,000 from a 401(k) plan to a Roth IRA on July 20, 2015, and ...

LOL! is offline   Reply With Quote
Old 01-26-2016, 05:27 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 4,172
Quote:
Originally Posted by LOL! View Post
These conversions with virtually no reporting except throwing some numbers on Form 1040 probably all benefit from a statement added to your tax return.

The instructions for Form 8606 talk about these extra statements and how to word them. I would probably add such a statement to my return even if I didn't have to file Form 8606 for other reasons.

This is from the instructions to Form 8606, but may not apply here:

Great find,LOL! Where exactly did you find that in the instructions?
I couldn't find that. .......and I agree more info can't hurt.
kaneohe is offline   Reply With Quote
Thanks this was timely!
Old 01-26-2016, 06:26 PM   #5
Recycles dryer sheets
GreenER's Avatar
 
Join Date: Nov 2014
Location: Pastures
Posts: 186
Thanks this was timely!

I was just contemplating this scenario over the weekend. I am planning to transfer a hunk from my 403b to Roth next year when I retire and was wondering how this was handled on taxes. Since we will be working only a partial year but will have already made enough to make us ineligible for ACA subsidy for 2017, I figured we may as well transfer as much as we can without exceeding the 15% bracket.
GreenER is offline   Reply With Quote
Old 01-26-2016, 07:49 PM   #6
Full time employment: Posting here.
 
Join Date: Jan 2014
Location: Austin
Posts: 661
My situation is exactly the opposite - I converted some tIRA funds to a Roth IRA last year and now, after all of the capital gains distributions last month and finding out this morning just how much of my 2015 dividends were NOT qualified, I determined that the taxes I would owe would be crazy high and a very poor example of a Roth conversion.

So today I filled out Vanguards "Recharacterization Packet" to reverse those transactions.

Not looking forward to the mess this is probably going to cause on what would have previously been a very straight-forward tax return.
__________________
ER'd 6/1/2014 @ age 53. Wow, is it already 2022?
Looking4Ward is offline   Reply With Quote
Old 01-26-2016, 08:00 PM   #7
Moderator
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 10,653
To the OP, why don't you just follow the interview on some tax software? You'll get the 1099-R with the conversion amount and a "2" in the distribution type box, if memory serves.
sengsational is offline   Reply With Quote
Old 01-26-2016, 08:49 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 4,172
Quote:
Originally Posted by Looking4Ward View Post
My situation is exactly the opposite - I converted some tIRA funds to a Roth IRA last year and now, after all of the capital gains distributions last month and finding out this morning just how much of my 2015 dividends were NOT qualified, I determined that the taxes I would owe would be crazy high and a very poor example of a Roth conversion.

.................................................. ......
I don't understand this..........if funds are in an IRA, any transactions within the IRA are disregarded for tax purposes. You would be taxed only on the amount of deductible funds in the conversion which presumably you knew.
What am I missing?

Sorry, I think I misinterpreted your post on first reading. I think you mean you got surprise dividend/CG distributions in your taxable account which along with your Roth conversion raised your income and produced crazy high taxes so you recharacterized the Roth conversion to reduce AGI.
kaneohe is offline   Reply With Quote
Old 01-26-2016, 10:15 PM   #9
Full time employment: Posting here.
 
Join Date: Jan 2014
Location: Austin
Posts: 661
Quote:
Originally Posted by kaneohe View Post
I don't understand this..........if funds are in an IRA, any transactions within the IRA are disregarded for tax purposes. You would be taxed only on the amount of deductible funds in the conversion which presumably you knew.
What am I missing?

Sorry, I think I misinterpreted your post on first reading. I think you mean you got surprise dividend/CG distributions in your taxable account which along with your Roth conversion raised your income and produced crazy high taxes so you recharacterized the Roth conversion to reduce AGI.
Yes, the distributions were in my taxable accounts. Sorry I wasn't clear and sorry to the OP for inadvertently hijacking the thread
__________________
ER'd 6/1/2014 @ age 53. Wow, is it already 2022?
Looking4Ward is offline   Reply With Quote
Old 02-14-2016, 09:58 PM   #10
Recycles dryer sheets
 
Join Date: Feb 2011
Location: Nottingham
Posts: 212
Well I finished taxes with Turbo Tax. The 1099-R includes the Roth IRA rollover with Code G. The software added the amount converted to Line 16b which added to our overall AGI.

Here's something interesting. Because it boosted our taxable income, we owe more federal tax, and because I did not have enough withheld, we got a penalty.

Is there a way to avoid a penalty when doing a Roth IRA rollover?


Thanks

Kannon
kannon is offline   Reply With Quote
Old 02-14-2016, 10:13 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 4,172
Quote:
Originally Posted by kannon View Post
Well I finished taxes with Turbo Tax. The 1099-R includes the Roth IRA rollover with Code G. The software added the amount converted to Line 16b which added to our overall AGI.

Here's something interesting. Because it boosted our taxable income, we owe more federal tax, and because I did not have enough withheld, we got a penalty.

Is there a way to avoid a penalty when doing a Roth IRA rollover?


Thanks

Kannon
The usual ways are to withhold from other sources if possible or to pay estimated taxes so you meet one of the safe harbors or fulfill Sch AI(form 2210) requirements for lumpy income.
kaneohe is offline   Reply With Quote
Old 02-15-2016, 12:43 AM   #12
Thinks s/he gets paid by the post
Fedup's Avatar
 
Join Date: Mar 2014
Location: Southern Cal
Posts: 4,032
I owe tax for years and the penalty has always been less than $100. I think I owed about $7k for federal and paid like $70 penalty. The cost of a cheap, very cheap CPA.


Sent from my iPad using Early Retirement Forum
__________________
Just another day in paradise
Fedup is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Rollover 403b to IRA jkern FIRE and Money 8 11-12-2015 09:06 AM
Advice please for rollover from 403b to IRA Tailgate FIRE and Money 4 08-12-2013 11:39 AM
Need Advice: Roth 403b vs. traditional 403b SingleMomDreamer Young Dreamers 0 01-10-2008 07:57 AM
Roth 403b AND Roth IRA? macdaddy FIRE and Money 3 07-05-2006 06:25 PM
? rollover of 403b to IRA at retirement. tednvon FIRE and Money 1 05-09-2005 01:49 PM

» Quick Links

 
All times are GMT -6. The time now is 02:55 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.