IRA Rollover

Archive for September, 2006

Question: If a 401K is rolled over into a Roth IRA before filing our return is it taxable to 2008 or 2009?

My wife changed jobs during 2008 so we have a 401k that needs rolled over (We’ve put if off). We had a low income for 2008 so we wont have any tax liability for anything in 2008. I also read something about “recharacterizing” the contributions, but that seemed more complex. I might look into that more if needed. So does a rollover go towards 2009? I know certain IRA things still count if you do them prior to filing your taxes, but I’m not sure about rollovers.
Thank You!

Answer: The year that the money is “distributed” from the 401K. If the money was distributed from the 401K in 2009 or is still in the 401K, then the conversion cannot be a 2008 event and must be 2009 or later. If the money was distributed in 2008 and you put it directly into the Roth in 2009 before the deadline for a rollover (which is a certain number of days after the distribution, and will expire before the filing deadline), then it is taxable in 2008 (and not 2009). However, if you roll it over into a traditional IRA and then convert that into a Roth, then it would be 2009 or later, because the year of conversion, rather than the year of the original distribution, would matter.

The ONLY transaction involving an IRA that can be counted as the prior year is a contribution. Also, what matters in that case is whether it is done before the filing deadline, NOT whether it is done before you file.

IRA Contribution Limits for 2009, 2010