Roth conversion

[Consultant]

Client rolled $80K from 401K to ROTH. Direct with Company he is employed who handled the transfer.
Was unaware of the 24% bracket he is now in. Can he undo? 1099-R has $80K in boxes 1 and 2a. Code G
in box 7. Should box 7 be 2 or 7? And is 8606 used for IRS reporting? That is basis?

[rbynaker]

Assuming this was an in-plan rollover (conversion) from 401(k) to Roth 401(k) it does NOT go on Form 8606. Code G is correct but depending on your software you might have to jump through hoops to get it to report correctly as taxable but not subject to penalty (i.e. ProSeries used to not handle this well but they might have added some checkboxes on the 1099-R Wks if you scroll down a bit.)

I don't think there's an Undo option but that may depend on the plan document. I haven't looked at them closely but to my knowledge there is no Ctrl-Z button on an in-plan conversion (which for some reason they sometimes refer to as a rollover).

Rick

[terryats]

I believe Beginning with the 2018 tax year, undoing Roth conversions are no longer permitted.

[Rapid Robert]

Conflicting answers above. Just from looking at the form instructions, I think rbynaker is correct. Code G is correct (rollover from 40x plan), and Form 8606 is not used (it is only for IRAs).

Can he do it over? I'd wager the answer is no. What did he think he was doing? Since it's going to be taxed some day anyway, it's not that bad, especially since his future rate might be higher (tax law changes). And now he has all that sweet tax free income in his Roth, isn't that what he was going for? IRMAA only matters if on Medicare, no indication of that was given (he's still working, so most likely on employer plan).

[BOB W]

Client rolled $80K from 401K to ROTH. Direct with Company he is employed who handled the transfer.
Was unaware of the 24% bracket he is now in. Can he undo? 1099-R has $80K in boxes 1 and 2a. Code G
in box 7. Should box 7 be 2 or 7? And is 8606 used for IRS reporting? That is basis?

I go crazy when people talk about "being in a 24% tax bracket". Clients automatically assume " all my income is taxed at 24%". I hope you know better.