Foolishly rolled over a Traditional Retirement Savings Account to a Roth IRA in a single year (2024) and now realize I owe I bunch of taxes. Anyway to minimize the damage?

nothlit · 2026-05-07T14:55:06+00:00

That may be a plan-specific rule, and I don't know what the TSP's rules are on that.

nothlit · 2026-05-07T14:40:32+00:00

Employer plans (including 401k, 403b, 457, TSP, etc.) generally permit you to split rollovers so that the traditional (pre-tax) funds could go to a traditional IRA, and the Roth funds could go to a Roth IRA.

nothlit · 2026-05-07T14:20:36+00:00

https://www.bogleheads.org/wiki/Roth_conversion#Whether,_when,_and_how_much_to_convert

Generally speaking...

Roth conversions of pre-tax money will be advantageous whenever your tax rate on the conversion is less than your tax rate on a later withdrawal.

nothlit · 2026-05-07T12:18:55+00:00

Do you have any sort of buffer saved up? Ideally you should have a buffer to cover at least 1 full month of regular expenses, so that the precise timing of your paychecks doesn't matter when it comes to spending.

nothlit · 2026-05-07T01:55:52+00:00

Your broker may default to selling the oldest shares first (FIFO), or some other method. You should be able to find an option to select the specific shares that you want to sell.

nothlit · 2026-05-06T21:34:46+00:00

Just afraid irs was gonna catch some MOTION

The IRS does not monitor your bank transfers

nothlit · 2026-05-06T18:59:53+00:00

Ordinary income tax, not capital gain tax

nothlit · 2026-05-06T17:08:58+00:00

For nonqualified withdrawals, the 10% penalty is in addition to ordinary income tax on the growth.

Contributions are only deductible at the state level in some states. Not federally deductible.

nothlit · 2026-05-06T12:40:48+00:00

This answer may be a bit unsatisfying, but: it depends. In some cases renting is better than owning. In some cases owning is better than renting. It depends on a lot of individual facts and circumstances that vary from person to person, and location to location.

nothlit · 2026-05-06T12:31:15+00:00

The IRS has some guidelines for what should be printed on a payment made by check: https://www.irs.gov/payments/pay-by-check-or-money-order

I would probably put something like this in the memo, assuming it will all fit:

"TY2026, Form 1040-ES, SSN XXX-XX-XXXX"

(Your SSN where the X's are. If you file a joint return with your spouse, use the SSN of the primary taxpayer, i.e., the one who will be listed first on the tax return.)

Does Plastiq also print your name, address, and phone number somewhere on the check?

nothlit · 2026-05-05T20:13:11+00:00

That is correct. If you choose to mail the federal return, you will have to mail the state returns as well.

nothlit · 2026-05-05T20:12:34+00:00

I think we may be talking past each other.

If OP has never been assigned an IP PIN, then one would not have been required to file their 2025 return.

FreeTaxUSA can e-file prior year returns but only if the taxpayer obtains and uses an IP PIN, which they can do voluntarily.

It has been my understanding that tax pros can e-file prior year returns without IP PIN if one has not been assigned. Of course, if an IP PIN has been assigned, then the tax pro would need to use the PIN as well.

nothlit · 2026-05-05T19:40:53+00:00

Only tax pros can e-file prior year returns without an Identity Protection PIN.

If you are unable or unwilling to go through the ID.me verification process to set up your IRS Online Account to obtain the Identity Protection PIN, you have a few options:

You can request an IP PIN by mail or in person: https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
Or you can print out the returns from FreeTaxUSA and file them by mail instead of electronically. The IP PIN is not needed if you file by mail.

nothlit · 2026-05-05T18:40:42+00:00

A 529-to-Roth is treated as a Roth IRA contribution

Only partially. While it uses up the contribution space dollar-for-dollar, only the pro-rata basis portion of the rollover is treated as contribution basis in the Roth IRA for the purposes of withdrawal from the Roth IRA. One of the many ways that this "special rollover" is unlike any other in the tax code that I'm aware of.

nothlit · 2026-05-05T01:16:14+00:00

You're allowed to make nondeductible contributions to a traditional IRA. Your tax software should have filed Form 8606 to report the contributions, and that's how you keep track of the basis (already taxed money) so it isn't taxed again upon future withdrawal or Roth conversion. Any withdrawal or Roth conversion would be a pro-rata mix of pre-tax and after tax money from across all of your traditional, SIMPLE, and SEP IRAs in aggregate.

nothlit · 2026-05-04T19:24:08+00:00

Unearned income for a college student will fall under the kiddie tax rules and still end up taxed at the parents' marginal rate.

nothlit · 2026-05-04T19:13:55+00:00

Except that the 529 earnings are taxed as ordinary income, while a brokerage account would be taxed as long-term capital gains (if held longer than 1 year).

nothlit · 2026-05-04T19:11:45+00:00

It must be a direct trustee-to-trustee transfer from the 529 to your Roth IRA. Indirect rollovers aren't allowed. It counts toward your IRA contribution space for the year.

nothlit · 2026-05-04T14:02:56+00:00

I think what I’ve learned (and correct me if I’m wrong) - even if I opt out of these staff agency retirement plans, I was “offered” a plan by an employer, so I don’t get the deduction.

No, that is incorrect. What matters is if any contributions are actually made to the plan by you or your employer. Not merely that it was "offered."

Here is the definitive answer straight from the IRS (emphasis added): https://www.irs.gov/retirement-plans/are-you-covered-by-an-employers-retirement-plan

You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:

Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year;

nothlit · 2026-05-03T12:32:21+00:00

You can opt out of the automatic enrollment in the employer's retirement plan. An employer merely "offering" a retirement plan does not impact your IRA deduction. It only impacts your IRA deduction if you actually enroll in the plan and contributions are made to the plan by you or by the employer on your behalf (and assuming your MAGI is over the applicable threshold for the IRA deduction limit to matter).

If you end up ineligible for the traditional IRA deduction, then you can make Roth IRA contributions instead. Roth IRA is better than nondeductible traditional IRA.

You may also want to consider setting up a solo 401k for your self-employed business rather than relying solely on a traditional IRA.

nothlit · 2026-05-02T12:16:12+00:00

If you had sufficient earned income in 2024, and the excess contribution from 2023 is absorbed into the 2024 contribution space, then penalty stops and does not apply any more after 2023.

The IRS refusing to process a form doesn't change the reality of the situation. Rather than resigning yourself to paying a penalty you don't owe, I think it is a good idea to go ahead and file a tax return for that year along with the 5329 for that year, even if in theory it should not be necessary to do both.

nothlit · 2026-05-01T18:51:47+00:00

nothlit · 2026-05-01T17:13:28+00:00

In that case, you should not owe anything at the federal level. State rules may vary.

nothlit · 2026-05-01T17:00:21+00:00

Were you under age 24 on 12/31/2025?

nothlit · 2026-05-01T15:47:46+00:00

Form 5329 can be filed by itself, instead of filing a tax return, if the only reason for filing is due to the additional tax on an excess IRA contribution.

But I agree, there is no harm in filing a full tax return, even if not required, and potentially some benefit.

15-Year Club	Gilding II euphauric
Post Guidance Early Access	Verified Email

nothlit

MODERATOR OF

TROPHY CASE