401(K) to IRA to a ROTH (Again) ?

[Guest KirkD.]

About a week ago , I posted the following :

"I transferred funds out of my company's 401(K) into a "self-directed" IRA and then converted the IRA into a ROTH ( and paid the subsequent taxes).

Can I now put additional funds into my ROTH , without having to transfer/convert more of 401(K) ?"

I received two posts stating that I CAN contribute funds aside from IRA conversions BUT upon reading IRS form 5305-R, Article 1, Item (2) states :

"If this Roth IRA is designated as a ROTH Conversion IRA , no contributions other than IRA Conversion Contributions made during the same tax year will be accepted."

Wouldn't my conversion be classified as a ROTH Coversion IRA ?

Yep - now I'm confused......

[BPickerCPA]

Sounds like you're reading a superceded version of the form.

[Guest KirkD.]

Barry ,

I'll buy that - though this is the only version of form 5305-R that I could locate.

Still, my confusion remains intact .

Can I ,legally, contribute funds to a ROTH Conversion IRA that was originally a 401(K) ?

How does the Paul Simon song go , "Still dense after all these years...."?

Thanks-

[Appleby]

According to Announcement 97-122, found in Internal Revenue bulletin 1997-50, the IRS recommends, but does not require, that the conversion Roth IRA be maintained separately from the regular Roth IRA. This was necessary because it was not determined how distributions from Roth IRAs would be taxed. Technical corrections were later passed, affecting, among other things, the taxability of distributions from Roth IRAs. These are the ordering rules. The 5305-R that you mentioned, encouraged individuals to maintain, qualified rollover contributions /conversions (described in section 408A(e)) in separate Roth IRAs from Roth IRAs containing regular Roth IRA contributions {describes in section 408A©(2)}.

The ordering rules negate the necessity of maintaining separate accounts. Many custodians are still using the old version of the form.

If you are using the old version of the form, you must check the ‘Regular Roth IRA’ box. If you already established the account and check “Roth Conversion IRA’, then you need to complete a new form and amend the account. A Roth IRA established as a ‘Regular Roth IRA’, can receive both conversions and regular contributions. A Roth IRA established as a ‘Roth Conversion IRA’ may hold only Roth conversion assets.

[Guest KirkD.]

Whew !

Thank you - a proverbial bunch !

The gentlemen that assisted me in my previous post ( John and Shelton ) mentioned that I could contribute to the converted ROTH but this version of the 5305-R threw me into a tailspin!

[John G]

I concur with the above. Under the current rules, you can have one account collect the various Roth sources. However, Roth and regular IRAs still do not mix. Neither can you mix or blend the accounts with your spouse.... So, each couple could easily have 4 IRA accounts, one Roth and one Regular for each adult. Add a few for kids, flour, sugar, and salt and you have.....