Help: Roth Conversion with some After Tax content

[Louis2]

I have a traditional IRA, rolled over from employer 401K upon my retirement four years ago. My contributions were about 90% pre-tax and 10% after-tax. I have done my homework on converting to a ROTH IRA and know the mechanics, but I am unsure on how to calculate my tax bill.

Reading up, the IRS (since 2014) would now allow me to have transferred the 90% into traditional 401K and the 10% into a ROTH, but that didn't happen in 2012 when I did the transfer.

- Logically, I feel that I should owe taxes on 90% of the conversion, but I realize that I have also not paid taxes on the GROWTH of the 10% that went in after-tax. Looking back at my 401K statements, I'm not even sure how to calculate that amount.

Am I missing something?

 

[SecondCor521]

I am not an expert, but I believe you are correct in your logic.

If you do the conversion this year, you should report your conversion on Form 8606 with your taxes next year. You would need your old 401(k) statements to be able to add up the after-tax contributions that you made (or your company may have sent you form 5498s with annual summaries of your after-tax contributions? Not sure about that.) The total of your after tax contributions should be put on line 2, and should ultimately reduce the percentage that shows up on line 11, that in turn should reduce the taxable portion of your conversion that ends up on line 18.

 

[Senator]

There should have been a form of some sort filed every year with the IRA. Like an 8606, but maybe a 401K is different?

 

[Louis2]

Thanks. I do have my 401K statements, but I found myself scratching my head wondering why my IRA manager (Vanguard) isn't tracking what portion is after-tax.

 

[SecondCor521]

Vanguard doesn't know because you rolled the money over from your 401(k).

You're responsible for keeping track of your basis. If you didn't save your paperwork from your 401(k), your best bet is probably to go back to your employer and ask them for that information.

 

[gauss]

Were the rollovers from 401k to IRAs done within the past 10 years?

If so, you can get IRS transcripts (the W2-1099 series) that will show you the 1099-rs for each year that you withdrew funds from your 401k. If you have kept all of the 1099-Rs that were issued from your 401k then you would not need to request the transcripts, but it still may be a good idea to verify that you did not miss any after-tax contributions.

The 401k provider will likely show the taxable amount (1099-R box 2a), which would be less than the full distribution 1099-r -Box 1, as well as your after-tax contributions (box 5) on the 1099-R . This all assumes that box 2b "Taxable amount not determined" is NOT checked.



This is the information that you will need to correctly complete IRS form 8606. Please read the instructions for 8606 carefully.

Even if 10% of your 401k contributions were after-tax, it is likely that your taxable amount of the 401k distributions will be more than 90% due to any growth in the account that has not been taxed yet.

-gauss

 

[bingybear]

I did my 401k -> IRA transfer long before they offered to allow you to put some in a roth. I've done some since, but without after tax contributions. When I did my 401k->TIRA I documented the after tax contribution amount, but I'd have to dig out the old forms. You should get a 1099R when you go from 401k to TIRA that should help you fill out those amount.

So when I did a TIRA -> Roth conversion the taxable amount is determined by using the pro-rata portion of what has not been taxes. Growth on after tax contribution is not seen as being taxed.

 

[CardsFan]

This is too late for you, but when I rolled a 401k to an IRA I was able to take the after tax contributions as a tax free lump sum. The manager of the 401k did the calcs, and I got a separate check, sent to me, and the 401k money went directly to the IRA account.

I agree that your former employer's 401k manager should be able to supply the needed info.

 

[Louis2]

Thanks to all. I do have the appropriate 1099 form from the 401k provider. I hadn't found it because I wasn't thinking to look for it!

Problem solved before I even had to make dinner. Thanks again.

 

[gauss]

This is too late for you, but when I rolled a 401k to an IRA I was able to take the after tax contributions as a tax free lump sum. The manager of the 401k did the calcs, and I got a separate check, sent to me, and the 401k money went directly to the IRA account.

I agree that your former employer's 401k manager should be able to supply the needed info.

Might be even a better idea to roll the tax-free portion into a Roth IRA within 60 days if the tax free portion was significant and you don't need the funds currently.

-gauss

 

[CardsFan]

Might be even a better idea to roll the tax-free portion into a Roth IRA within 60 days if the tax free portion was significant and you don't need the funds currently.

-gauss

You are correct, and I should have done that. At the time I did not have any Roth accounts, and did not investigate this option. I guess it is too late for me too.

 

[kaneohe]

Thanks to all. I do have the appropriate 1099 form from the 401k provider. I hadn't found it because I wasn't thinking to look for it!

Problem solved before I even had to make dinner. Thanks again.

If you have any other TIRAs besides the rollover one, their values (and basis) must also be reflected on the 8606 since you are considered to have one big IRA, not individual accounts. Assuming no other basis, this would have the effect of increasing the taxable % even higher than the 90% (like the growth of
the after-tax portion).