Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hello JA Customer,
Yes, you may rollover the funds in your SEP IRA to your employer's 401k account tax free, as long as their plan allows this.
I am giving you a link to a page on the IRS website which discusses rollovers from various plans. There is an additional link on that page to a helpful "rollover chart" which shows what plans can be transferred to other plans.
Here is a link to the rollover chart.
You will see in the chart that rollovers are permitted from the SEP IRA to any qualified plan, which would include a 401k.
You are correct that the only portion of your SEP IRA that could be rolled over are the funds which are tax deferred.
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Thank you JA Customer
Thanks for your answer Merlo. I had seen the references on both of these links before. As far as I know, all of the funds in my SEP are tax deferred as I put them in pretax (reported them as deductions on my tax returns). Items of confusion for me in IRS Pub. 590, page 23, were these two statements:
1) "You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan" (my underline added); and
2) "However, a special rule treats a distribution you roll over into an eligible retirement plan as including only otherwise taxable amounts if the amount you either leave in your IRA's or do not roll over is at least equal to your basis."
So, for example, can I rollover, tax free, all of my SEP to the SPP 401(k)?
Hello again JA Customer,
These statements only pertain to someone who has an IRA account which contains both after tax and pre tax contributions. It would not apply in your case.
Basically when you have an IRA that contains both after tax and pre tax contributions, you cannot simply pick and choose which funds to roll over. It has to be done on a percentage basis. That is why they are saying that you cannot just leave in the amount equal to your basis. The entire rollover in that situation would be taxable.
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