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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13344
Experience:  15years with H & R Block. Divisional leader, Instructor
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Someone has a balance in a 401K and wants to move it to a Roth

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Someone has a balance in a 401K and wants to move it to a Roth IRA. It seems a while back you had to first move it from the 401K into a Traditional IRA, THEN convert the new Traditional IRA to a Roth IRA (two steps). However, it seems I read recently that you can now move dollars from a 401K DIRECTLY into a Roth IRA, in one step ???

Robin D :

Hello and thank you for using Just Answer,
This all happened under the American Relief Act.
In-plan rollovers to designated Roth accounts. If you are a participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. The rollover of any untaxed amounts must be included in income. For 2010 in-plan Roth rollovers, the taxable amount is included in income in equal amounts in 2011 and 2012 unless you elected to include the entire amount in income in 2010. You may be required to include an amount other than half of a 2010 in-plan Roth rollover in income in 2012 if you also took a distribution from your designated Roth account in 2010 or 2011.

Robin D :

A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. Elective deferrals that are designated as Roth contributions are included in your income. However, qualified distributions are not included in your income.

Robin D :

It is possible, what you heard, but the above rules for do this are different then just converting to any ROTH IRA.

Robin D :

You can read more about this in IRS Pub 575
http://www.irs.gov/pub/irs-pdf/p575.pdf

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