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Financial Planning / Tax Strategies
|Subject: Re: 401k roller, basis, and ROTH||Date: 1/4/2014 1:25 PM|
|Author: TMFPMarti||Number: 119796 of 121114|
She and I were in the same plan. Same employer for a time. That's how we met.
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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