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Subject:  Re: 401k roller, basis, and ROTH Date:  1/4/2014  1:25 PM
Author:  TMFPMarti Number:  119796 of 127642

She and I were in the same plan. Same employer for a time. That's how we met.

Love it!

Yes, these are after-tax contributions

With things as they stand the only thing you can do is deposit the whole check into a traditional IRA. The after-tax money is then treated like any after-tax contribution to a traditional IRA. (If you do things this way don't forget to include Form 8606 to update her basis when you file your 2014 return.)

There are options when taking a lump-sum distribution of a 401(k) with after-tax money in it, but it sounds like you told them to transfer the whole thing to her IRA. The other option would have been to take a distribution of the after-tax money and roll everything else into the IRA.

If you want to do the Roth maneuver mentioned in the link I provided it has to be a lump sum distribution of the entire account, complete with 20% withholding. Since it's so early in the year you could adjust your current withholding so that you didn't have to wait until 4/2015 to get your money back, but you'd still have to come up with the cash now to make the rollover complete.

As I said before, if you want to do something other than roll everything into the traditional IRA you'll have to see if you can "undo" the distribution and start over.

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