Traditional Solo 401K Conversion to ROTH IRA

Submitted by Alice Zab on Mon, 2020-07-13 23:45

I have a Solo 401K. I want to covert some funds to a ROTH IRA. I understand that I do not need to file a form 5498, but how do I report the conversion to IRS, i.e., is there a specific IRS form I need to use and where am I supposed to report it on my tax return?



Submitted by Alan - IRA critic on Mon, 2020-07-13 23:57

Be sure you are allowed to take a distribution from the solo K if you are still in business. If so, and you do a direct rollover to a Roth IRA (generally taxable), you must issue a 1099R (Code G) to report the direct rollover distribution. The Roth IRA will issue a 5498 to report a rollover contribution. You will report the 1099R on lines 4c and 4d of Form 1040 (taxable amount on 4d).

Submitted by Alice Zab on Tue, 2020-07-14 20:17

Thank you, Alan and Spiritrider.  Apologize my question was not specific.   I would like to CONVERT some funds from my sole-proprietor (age > 70.5) owned solo-401K (TAX-DEFERRED) to Roth IRA (TAX-FREE).     1. Do I need an IRS 1099R/1096 to report the transfer out of the solo-401K?  Also what boxes are filled in this form for this transfer out?  How is the Fed W/H reported and paid if ‘underdetermined’ is checked (box 2b?) on this 1099R ?

2. Do I need a 2nd IRS 1099R/1096 to report the transfer in into the ROTH IRA ?  Also what boxes are filled in this form for this transfer in?

3. Do I need IRS 5498 to report the conversion (tax-deferred to tax free) into for the ROTH IRA?    Also what boxes are filled in this form for this conversion?

I understand 5498 is used only for reporting IRA activity not 401K activity.

4.  What other IRS forms are required for the conversion?

Again, thank you in advance

Submitted by William Tuttle on Tue, 2020-07-14 13:00

  • IRS regulations prohibit the in-service distribution of employer deferrals prior to age 59 1/2.
  • IRS regulations allow but do not require the option of in-service distributions of employer contributions prior to age 59 1/2.
  • All of the one-participant 401k plans I am aware of have; age of contribution, time of service and/or participant age restrictions on in-service distributions of employer contributions.
  • There is one other option to do Roth conversions, but does not change the distributible nature of the assets. IRS regulations allow a 401k plan with designated Roth accounts to support an in-plan Roth rollover (IRR).
  • To my knowledge E-Trade is the only one-participant 401k plan provider to support IRRs. You could:
  • Amend your one-participant 401k plan to E-Trade by executing the amendment section of E-Trade’s adoption agreement.
  • Move the assets from your current one-participant 401k plan to E-Trade by trustee -> trustee transfer.
  • Close the 401k accounts at the previous provider.
  • Do IRRs or pre-tax employee deferrals and/or pre-tax employer contributions.
  • However, the results of the IRRs retain the distributible nature of the original contribution.

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