401k Rollover Error with Pretax, After-tax, and Roth Conversion - Need Urgent Advice!

What you're dealing with is a pretty common rollover issue with mixed pre-tax and after-tax funds. Let me help break this down: For your first question, you'll need to file Form 8606 (Nondeductible IRAs) with your tax return. This form specifically tracks the non-deductible (after-tax) contributions in your Traditional IRA, establishing your "basis." When you did the Roth conversion, you should receive a 1099-R from Vanguard showing the conversion amount. You'll report this on your taxes, but you'll also report your basis on Form 8606 so that only the pre-tax portion (if any) is taxable. Keep all documentation from Fidelity showing the after-tax amounts as supporting evidence. For the 3% match question - matches are always pre-tax regardless of which account they end up in. If the match had gone to your Roth, you would have paid tax on it this year. With it in your Traditional IRA, you'll pay tax when you withdraw it in retirement. So tax-wise, the match being in the Traditional IRA is normal and probably preferable unless you're expecting to be in a higher tax bracket in retirement. Regarding converting the proportional gains - this is related to the "pro-rata rule." If you did a partial conversion, you need to calculate what percentage of your Traditional IRA is after-tax contributions, and that same percentage of your conversion would be tax-free. The rest would be taxable. Converting gains now can make sense if you expect to be in a higher tax bracket later or want more tax-free growth potential.

I went through something similar last year and found https://taxr.ai incredibly helpful. My 401k provider messed up coding my rollover that had both pre-tax and after-tax contributions. I had statements showing the breakdown but wasn't sure how to properly document everything for the IRS. I uploaded my rollover statements and 1099-R to taxr.ai and they analyzed everything, explained exactly what forms I needed to file (Form 8606 was key), and showed me how to calculate the taxable vs non-taxable portions. They also gave me a document explaining the situation that I could include with my return. Saved me from paying thousands in unnecessary taxes on money I'd already paid tax on!

Just wanted to follow up and say I tried taxr.ai after seeing the recommendation here. My situation was almost identical - had after-tax contributions in my 401k that got incorrectly rolled into a traditional IRA, then I did a Roth conversion to fix it. The service analyzed my statements from both providers, identified the exact after-tax portion, and showed me precisely how to fill out Form 8606 to avoid double taxation. They also created a letter explaining the situation that I can include with my tax return. The best part was they found that my 401k provider had miscalculated my after-tax basis by about $3,200! So I would have either overpaid taxes or risked an audit by claiming the wrong amount. Definitely worth it for the peace of mind alone.

I know everyone's focusing on the tax forms, but honestly, I'd recommend trying to actually speak with someone at the IRS about this. I had a similar issue last year and spent MONTHS trying to get through on their phone line with no luck. Then I found https://claimyr.com which got me through to an actual IRS agent in about 15 minutes when I'd been trying for weeks on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I talked to was able to put notes in my file about the rollover situation and gave me specific instructions on how to document everything. Most importantly, they flagged my account so if there was any automated letter about the rollover looking like a taxable event, they would already have documentation on file explaining the situation.

I was completely wrong about Claimyr. After posting that skeptical comment, I was desperate enough to try it because my tax situation with a botched 401k rollover was getting worse by the day. Not only did I get through to the IRS in about 20 minutes (after trying for WEEKS on my own), but the agent I spoke with immediately understood my rollover issue. She confirmed exactly what I needed to document and even put notes in my account about the after-tax portion that was converted. The peace of mind was incredible - knowing that there's actually documentation in the IRS system explaining my situation before I even file means I'm not just hoping my explanation with the tax forms will be enough. If you have a complicated tax situation like this rollover issue, being able to actually talk to someone at the IRS makes all the difference.

One thing nobody's mentioned yet - you should look into whether you qualify for a "mega backdoor Roth" strategy going forward. If your previous employer allowed after-tax (non-Roth) contributions to your 401k, your new employer might too. The ideal process would be to roll those after-tax contributions directly to a Roth IRA (which is what should have happened in your case). This is completely legal and allows you to get way more money into a Roth than the standard contribution limits. For your current situation, definitely file Form 8606 to track your basis (the after-tax amount), but also consider getting a tax professional just for this year. This is complicated enough that having someone who deals with these issues regularly is worth the money.

I think everyone's overthinking this. I've done several rollovers and the key document you need is the final statement from your old 401k provider showing the breakdown between pre-tax and after-tax amounts. Get that, keep it with your tax records, and report things correctly on your Form 8606. The fact that Vanguard messed up initially is annoying but fixable. For the future, be aware you can request a direct trustee-to-trustee transfer instead of having checks sent, which often prevents these kinds of mixups.

I've been through a similar rollover mess and want to add a few practical tips that helped me navigate this: First, regarding your concern about not investing the money - you're actually smart to keep it in cash/stable value until this is sorted out. Capital gains/losses on top of the rollover confusion would just create more headaches come tax time. For documentation, create a simple spreadsheet tracking everything: original after-tax contribution amounts from Fidelity statements, the rollover amount, the Roth conversion amount, and dates for everything. This becomes your "story" that connects all the 1099s you'll receive. One thing I learned the hard way - if you're going to convert more money from Traditional to Roth (like the proportional gains the EY person mentioned), do it before December 31st. Roth conversions can't be undone anymore, so you want to be strategic about the timing and tax implications. Also, don't just rely on Vanguard's customer service to "code this correctly." They're not tax advisors and their 1099-R will likely just show a standard conversion. The burden is on you to properly report this on your tax return using Form 8606, regardless of how their forms look. Last tip: if you do decide to hire a tax professional, find one who specifically deals with complex retirement account issues. Many general CPAs don't handle these mega backdoor Roth situations regularly and might not catch important details.