Mega Backdoor Roth Reporting
How is the reporting done for a mega backdoor Roth? I’ve heard that it’s done as a conversion, but then wouldn’t the aggregation rule come into play? Thanks!
How is the reporting done for a mega backdoor Roth? I’ve heard that it’s done as a conversion, but then wouldn’t the aggregation rule come into play? Thanks!
Permalink Submitted by Alan - IRA critic on Fri, 2023-10-20 17:04
No. A rollover of your after tax 401k contributions either into the Roth 401k account in the plan or out to your Roth IRA does not involve any of your non Roth IRA balances. Form 8606 does not apply when reporting the 1099R form you will receive. However, any gains in the after tax portion of your 401k that are converted will be taxable.
Permalink Submitted by David Rath on Fri, 2023-10-20 17:16
So you can just deposit the after-tax money into a Roth IRA and use the 1099R as proof of source?
Permalink Submitted by Alan - IRA critic on Fri, 2023-10-20 19:13
Better to do this as a direct rollover to the Roth IRA, but if you receive a check payable to you presonally, you can do a 60 day rollover to your Roth IRA and tell the Roth custodian that it is a rollover contribution. If there is a small amount of gains involved it is simpler to include them in the rollover as well, but any gains included in the distribution will be taxable. If the gain is more substantial, you could split the rollover and deposit the after tax amount in your Roth as a rollover contribution and the pre tax gains into a traditional IRA. That would eliminate tax on the gain. The 1099R from the plan will be reported directly on lines 5a and 5b of Form 1040, with 5b being the taxable amount, if any.