can i get 401k contribution break on ira to 401k transfer

Discussion in 'Taxes and Accounting' started by ggelitetrader000, Oct 21, 2019.

  1. This year I was contributing both to 401k and ira but found out because of my income level as well as the fact I am contributing to 401k, my ira contribution is no longer eligible for tax break. I still have about 10k$ left before reaching the contribution level limit for my 401k which I am thinking to "contribute" from ira which is actually a roll-over isn't it? If I do that will that transfer to 401k can be considered a contribution for the purposes of tax break? Because my argument is I was unaware of that ira ineligibility and could have easily contributed directly to my 401k instead. Thanks.
  2. Sig


    If you overcontributed to your Roth IRA you can just take that money out of the IRA as long as you do it now. The only wrinkle would be any gains you made from that money so far this year, which are more complicated and you'll probably end up paying a penalty on them. Once you take the money out it's yours to do with as you wish. If it's possible for you to contribute them to a 401k just do it as you would any other contribution to the 401k, or your can pay credit card bills or go on vacation or whatever, it's just cash at this point. You're making it over complicated with the "rollover" idea.
    Just to really blow your mind, you can make after tax contributions to a regular 401k and then roll them over to a Roth even if you exceed the income limits to contribute to a Roth. Look up "backdoor roth" to see the specifics, as there are some arcane rules to it.
    And as always I'll caveat this to say not to base any decision on some random jackass on an internet forum for this, and I'm a random jackass on an internet forum. Hopefully I've given you some hooks to do some primary research and you can make your decisions based on that.
    BlueWaterSailor likes this.
  3. i did not say roth IRA, it is traditional IRA.
  4. Sig


    Everything still applies, you can withdraw funds you incorrectly sent to a regular IRA as well if you do it now with the same caveat regarding profits from those contributions.
  5. Contributions to 401k are from employer-based salary reductions, no other source. 401k plans have more "generous" provisions such that it's uncommon/impossible? to transfer IRA-to-401k. (Common to transfer the other way... usually when you leave your employer.)

    There are dollar limits to "contributions to all tax-qualified plans" with perhaps specifically delineated exceptions. That is, your situation may allow you to contribute to more than one plan, but there is a dollar limit for the sum of all plans. You may reach the maximum sum in one plan and therefore be ineligible this year for contributions elsewhere.

    "...Because my argument is I was unaware of that ira ineligibility and could have easily contributed directly to my 401k instead. Thanks..." This argument carries no weight with the IRS, sorry.

    If you are young, suggest you get working on the Roth IRA. In the long run it has huge tax and estate advantages and is potentially waaayyy more valuable to you than 401k..
    Last edited: Oct 25, 2019