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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15176
Experience:  15years with H & R Block. Divisional leader, Instructor
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I am 23 years old, and I would like to convert a traditional

Customer Question

I am 23 years old, and I would like to convert a traditional 401k plan from an internship I did over the summer into a Roth IRA. There is approximately $600 within the 401k plan that was contributed by me. I would like to know of any tax provisions I should be aware of before I do this.
I am currently attending my last semester of grad school. I am a Teaching Assistant at my school and make a stipend of about $980 a month. My wife is a second lieutenant in the Air Force and makes about $42,000 per year.
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.


When you convert the deferred account to a non deferred tax retirement account (like a ROTH) you pay tax on all the amount in the 401k that has not been taxed yet. From then on the ROTH grows tax free.

The $600 will be added to your income for the year and at this point is not going to increase your income by so much that you will have a huge tax when you file.

Gross Income $54,360.00

Total Tax (Pre-Credits) $4,201.50

Of course any tax withheld from wages should be deducted form the tax to see what your actual tax refund or balance due would be for 2015.

You will most likely have to roll this 401K into a Trad IRA first (non taxable event) then convert the Trad to a ROTH.

Expert:  Robin D. replied 1 year ago.

Please advise if you need more information or rate positively.

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Customer: replied 1 year ago.
I am already in the process of rolling over the 401k into a traditional IRA. Will I be able to keep the full $600 when I convert from the traditional IRA to the Roth IRA? Are there any specific forms I need to fill out for the IRS before I do this? Or, do I simply notate it when I file taxes for the current year?
Expert:  Robin D. replied 1 year ago.


Yes, when you convert the Trad to a ROTH you keep the amount. The custodian may have a fee so you need to check with them but that has nothing to do with taxation of the conversion.

You will receive a 1099R for the conversion and you just include that information when you file your return. It looks like a distribution on your tax return from the Trad IRA.

A conversion to a Roth IRA results in taxation of any untaxed amounts in the traditional IRA. The conversion is reported on Form 8606, Nondeductible IRAs.

The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply.

Expert:  Robin D. replied 1 year ago.

I hope the follow up information clarified your situation.

Expert:  Robin D. replied 1 year ago.

Please advise if you need more information but rating in a positive way is acceptable.