Who tracks the money?

[UncleHoney]

I'm thinking of rolling over my 401K into an IRA. About 20% of the 401K value is after tax money. If this goes into an IRA how is the after tax portion tracked so I don't get double taxed 10 years from now?

[Texas Proud]

Is it really in your 401(k) I remember way back when they had it in one of my companies but it was outside the plan...

But, I would think (read opinion)... that it would be just like if you put after tax money into an IRA.. you have to keep track of that amount and when you take it out fill in the IRS form saying how much is taxable and how much is a return of your investment...

[UncleHoney]

It's really hard to tell where any of the 401K money is. From what I read there is a company trust fund that holds the money till you take distributions.

Sounds like a prime place for good record keeping when I get the money.

[LOL!]

You simply look at your Form 8606's that you've been filing with your tax returns all along. They tell the IRS how much after-tax money you have in your 401k.

[jazz4cash]

Well I never filed any 8606's, but I did stay in a Holiday have after tax money in my 401k which was at Fidelity. When they do the rollover, make sure they split off the after-tax portion. You can do whatever you want with the after-tax portion. Don't put it in the same IRA with the pre-tax.

[UncleHoney]

Quote:

Originally Posted by LOL! You simply look at your Form 8606's that you've been filing with your tax returns all along. They tell the IRS how much after-tax money you have in your 401k.

With a 401K I have never filled out a 8606. All the before tax contributions come off the top and only show up as a reduction in taxable wages. After tax money deposited in the 401K is just reported as regular income.

It's only when you start taking distributions that you need to somehow keep track. I guess it's up to the taxpayer.

[kaneohe]

If Martha doesn't rescue you w/ an answer, you should ask this question at Fairmark.com. My guess is that you would file the Form 8606 in the year that you do the rollover to track the non-taxable part. Otherwise IRS will assume that all is taxable when withdrawn.

[UncleHoney]

I just found all the gory details (too many pages of fine print). It's my responsibility to report the after tax portion of the rollover to the IRS.

So looks like I get to fill out an 8606. When does the fun part of retirement start?

[Achiever51]

Earlier this year I rolled over my 401(k) to Vanguard and a portion of it was after-tax $$. Vanguard advised me to put the after-tax $$ into a traditional IRA and the pre-tax $$ into a rollover IRA to keep the two separate -- as I plan to withdraw after-tax $$ before I touch the pre-tax $$ when I start to take distributions from my IRA. They also advised me to submit an 8606 form to the IRS for the amount of after-tax $$ I moved to Vanguard with my '07 tax return. Like the OP, I never filed this form during my employment -- in fact, I never heard of it before VG told me about it.

[UncleHoney]

Two separate accounts sounds like a good way to keep track of the after tax money.

[Achiever51]

I think so. Having both at VG makes it easy to adjust asset allocations, etc. I see both when I log in to the VG site, so it's really just an recordkeeping issue.