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    401k rollover and taxes?

    So I had a 401k with a previous employer awhile ago and I rolled it over into an IRA rollover account with Fidelity. It was a small amount so I never really did anything with it and I have other accounts now. But recently I decided to just throw some money at it which got me thinking afterward I did that. It was a 401k which will be treated like a regular IRA with taxes, now the money I put into it has already been taxed, will it be taxed again when I withdraw it when I retire? Would it be better to withdraw the money this year and pay the taxes on it and then reinvest it into a Roth IRA? Or should I just keep it and don't put any more money into it and let it grow on its own?

    #2
    Originally posted by Andrew23 View Post
    So I had a 401k with a previous employer awhile ago and I rolled it over into an IRA rollover account with Fidelity. It was a small amount so I never really did anything with it and I have other accounts now. But recently I decided to just throw some money at it which got me thinking afterward I did that. It was a 401k which will be treated like a regular IRA with taxes, now the money I put into it has already been taxed,
    You should have deducted that from your income taxes in the years you made the contributions.

    will it be taxed again when I withdraw it when I retire?
    Yes, because the IRS will reasonably assume that you deducted that money in previous years.

    Would it be better to withdraw the money this year and pay the taxes on it and then reinvest it into a Roth IRA?
    And pay the 10% penalty?

    Or should I just keep it and don't put any more money into it and let it grow on its own?
    You should file amended tax returns for as far back as you can.

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      #3
      Originally posted by Andrew23 View Post
      So I had a 401k with a previous employer awhile ago and I rolled it over into an IRA rollover account with Fidelity. It was a small amount so I never really did anything with it and I have other accounts now. But recently I decided to just throw some money at it which got me thinking afterward I did that. It was a 401k which will be treated like a regular IRA with taxes, now the money I put into it has already been taxed, will it be taxed again when I withdraw it when I retire? Would it be better to withdraw the money this year and pay the taxes on it and then reinvest it into a Roth IRA? Or should I just keep it and don't put any more money into it and let it grow on its own?
      What you are saying is a little confusing. Were the contributions you made to the 401K pretax or Roth contributions? Was it pretax contributions that were rolled over into a traditional IRA?

      Did you then make another contribution ? If so, in what tax year?
      Is this new contribution deductible on your taxes? If not, you need to keep track of the basis (your contribution) on your taxes. (If it was a deductible contribution--then it also needs to be reflected on your taxes to get the deduction) Either way you can do a conversion to a Roth. Basically you use the funds in the current IRA to buy another Roth IRA. You will receive some paperwork for taxes. You pay taxes on the difference between your basis (you will have a basis if your contribution was non-deductible) and the value of the account at the time of conversion.

      Here is a link that might help understand the steps involved
      https://thefinancebuff.com/backdoor-...made-easy.html

      One common misstep that folks make in this process is failing to get the nondeductible contribution reflected on the tax form (this must be done for the tax year in which the contribution was made and must be continued to be tracked). Then, when the conversion is done there is no basis and the entire amount is taxed.

      (Another assumption is that you don't have any other traditional IRA accounts because the IRS looks at all your IRA accounts as a whole. If it is a partial conversion it becomes much trickier. )
      Last edited by Like2Plan; 09-17-2017, 04:12 AM.

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        #4
        Originally posted by Nutria View Post
        You should file amended tax returns for as far back as you can.
        Which is 3 years back using April 15th on the year following the tax year. Currently, you can get a refund for tax year 2015 (but file any 1040x you think you should and let the 'statute' unit determine whether or not you get the refund - there are lots of reasons that can change the statute of limitations).
        I YQ YQ R

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