I did a major muck-up; wondering what the tax consequences might be?

DH left his old job and I wanted to get his crappy-performing (pre-tax) 401k out of his old company account and move it to Vanguard.
Did this online and didn’t fully comprehend the recharacterization choices ('cuz it’s hard with DH breathing down my neck asking questions every few seconds about what I’m doing).
So… ended up choosing to recharacterize $520k 401k pre-tax to a Roth IRA (tried reversing and talking to Vanguard to no avail). Our income is $70k.

We’ve finally come to grips with the fact that we’ll just have to pay $$$ taxes for 2020 .
I’ve tried to contact the IRS, but I get stuck in an endless loop of pushing buttons and never get to anyone.

Any idea what the tax amount might be? (30 years of input for the $520k)
And can we use money from the now-Roth IRA to pay that tax?

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This is an automatically-generated Wiki post for this new topic. Any member can edit this post and use it as a summary of the topic’s highlights.

Here’s a general article that covers much of the ground.

The last tax reform back in 2018 got rid of the option to recharacterize (undo) Roth conversions, so I think they’re irreversible at this point even for qualified plans like 401k. I’m sorry you did this in a rush but I’m afraid you may be stuck with it.

On the bright side, a Roth conversion increases the after-tax value of retirement funds and is a bet on a rising market (which hopefully worked/works out for you), and especially so if you pay taxes due from outside the IRA, which is preferable if possible.

For your expected 2020 taxes, you can plug in your own numbers here and see what the difference is. I get about +$145k extra (vs $2600 total) assuming all of his 401k contributions were deductible or matching (pretax, this is typical; it’s possible for some special situations to have non-deductible traditional 401k contributions but that would be unusual and you’d have had to have gone out of your way to do it). I also didn’t include either state taxes or any special deductions.

I wouldn’t bother trying to talk to the IRS, just post your questions here. They’re not going to be super helpful in this situation I don’t think.

As for using your now-Roth funds to pay part of the tax, this depends on several factors but most importantly-

  1. How old is DH now? Is he 60 yet, older, or younger?

  2. When was the Roth IRA that you moved the 401k funds into first opened? Was it new and just opened to receive this transfer/conversion, or had it been around for some time with prior Roth contributions in it? There’s a “5 year rule” that can apply.

I can give better advice if you answer these questions, but broadly, do you have an extra $150k of taxable savings you could tap to pay these taxes if you needed to? That would likely be better than cashing out part of the retirement account to pay the taxes, and if there would be tax penalties involved, that would be true only moreso.

There’s also a covid relief provision which makes it easier and less painful to take out funds from your IRA, but it would have to be done before end of year. See the IRS FAQ Q5-7

But basically if you claim covid hardship, which I’m sure no one is checking, you can take out $100k from your IRA without early withdrawal penalties (if any applies to your situation) and in addition, you can pay back the funds into the IRA if you do so within the next 3 years. Ideally this gives you a bit of extra time to save up taxable funds to meet this years tax hit if necessary. It looks like most of these rules are written with pretax plans in mind rather than Roth, so it might be good to double check that if you think you’ll need the withdrawal liquidity to pay your taxes.

If you want to get a second and third opinion, just in case I might have missed something, it couldn’t hurt to post your questions on these two boards.


I would do this now/promptly, since even though I think there’s not much you can do, if there is a way to undo it, you may need to act before the new year and it’s a busy week for IRA departments with last minute IRA distributions and such. If you do, please post links to your threads and I’ll be interested in the answers and may be able to comment on which posters there are reliable.


Just to recap, if OP wants to ask elsewhere, the relevant questions in my mind are

  1. Confirm reversing the conversion isn’t possible
  2. Confirm the terms of the covid relief applies to Roth IRA
  3. best plan for paying the taxes and/or repaying the Roth if needed under #2
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Sounds like you have the resources to pay the taxes if you need to from a few places, so that’s good.

how old is the Roth IRA account, the one that you moved the 401k funds into? Since DH is under 60, there would potentially be penalties (absent the covid relief I mentioned) for taking Roth funds out in the near term, again, depending on the details.

Maybe he can sue you and get you committed. As an official lunatic, you might be able to sue the IRS for not making allowances for your disability.

Disclaimer: Even with the undeniable logic of the above, I am not a lawyer, plumber, Indian Chief, or d̶i̶s̶t̶i̶l̶ doctor.

ETA: This edit is way late, but better late …
I was not trying to make fun of your situation. It sucks and there seem to be few options. This is also relatable …

Fortunately, she can understand, but chooses not to as that is one of my responsibilities. She is still interested and curious for about 90 seconds while in my office. :slight_smile:


This recent development doesn’t sound right…

There would never have been a “penalty” to convert a 401k into a Roth IRA.

The concern is TAXES. And age makes no difference on whether those taxes are owed, or not.


Distribution code G means the money was “rolled over to another qualified plan”.

The fact that you have a taxable amount of $0 would imply that it was rolled into a traditional IRA rather than Roth.


You have the tax form that says you won’t owe anything related to the 401k move you did. This is what you had hoped for. Who are you to question the wisdom of Wells Fargo and their professional tax staff who provided it?

Now if they really did give you this form after putting all that money into your Roth instead of a traditional, then you’ve won the lottery and won’t end up paying taxes on that at all. And you know what you do if you win the lottery? You stay very quiet and don’t post about it online.


Do whatever you like. Any CPA given that 1099R will put it thru the same way as your H&R Block software. It says “taxable amount $0” right there in box 2a. If it were me using a CPA, I might tell them “we did a retirement plan rollover last year and got this form”.

The real question is - how sure are you that it didn’t end up in a traditional account at Vanguard instead of a Roth. That’s what I’d be double checking. If it’s in a traditional, that explains why you got the form like this, and that’s what you had wanted anyway. if the rollover did end up in traditional IRA after all, you might let us know.


haha, professional tax staff

^this - sort of

But only if you want to risk it. It may not be Wells Fargo’s responsibility to know and report whether or not the rollover they did was to a similarly tax deferred IRA or a Roth IRA. They just know they sent the money to Vanguard and didn’t cut a check to you, therefore to them it’s not taxable. Just because you received this form doesn’t mean the money isn’t taxable. You know it didn’t go into an IRA. You know it went into a Roth IRA. Just because Wells Fargo doesn’t know what you know doesn’t get you off the hook.

But, if you play dumb, you’ll probably never have to worry about this. With that sort of document, I can’t see the IRS ever being able to say you evaded taxes on purpose.

Final judgement - your rollover is still taxable, but this form gives you plausible deniability if you want to try and get away with not paying taxes.


You are going to owe around 30% on the 520k. There is no way to convert a 401k to a Roth without paying taxes. You’re looking at a $152k tax bill. If you don’t file to pay the taxes then you’ll get a letter from the IRS in a few years saying that you owe interest plus penalties which could be another $25 - $30k.

You might be able to work out a payment plan with the IRS if you call them an explain the situation.

Like xerty suggests – first thing I would do would be to double-check whether the money in fact went into a Roth at all, or whether they opened a traditional IRA for the incoming funds.

While convoluted, I could imagine that it might be possible for an incoming 401k distributions to default into a traditional IRA and then for the brokerage to handle the conversion to a Roth, if there was one. Or for that conversion to need to be requested as an explicit follow-up step.

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Shouldn’t Vanguard be issuing a form 5498 which will show the rollover to a roth, thus owing taxes?

if you call them an explain the situation? Really have you ever spoken to anyone competent in the IRS?


Not until late May though. They’re informational only.

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Informational only for you AND the IRS. The IRS is going to know that the funds were transferred to a Roth IRA and taxes are owed.

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The situation you described did not involve a contribution, so that part isn’t relevant. You’re talking about a rollover and/or a conversion, not a contribution or a recharcterization.

Any IRA activity at all, including a rollover of any sort, generates a 5498. This doesn’t change anything. If you’ve got tax consequences from your IRA activity, you should get a 1099R reflecting those.

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I think this is the key comment. I wouldn’t worry about posting it here though

I wonder how often this happens with rollovers and recharacterizations, where some peon pushes the wrong button

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