Carefull of pro-rata … When I transferred my after-tax 401k to my Roth IRA account, they made a mistake and put my money into my traditional IRA account instead of my Roth IRA account. It is a little complicated, but you may be able to meld what you have already done and what the guide says to do. I will try to go to my IRA provider tomorrow and talk to them one more time to see if any correction is possible. Box 5 10,496 In contrast, a Roth IRA … Thank you in advance! You don’t need a Form 8606 when you go from the plan directly to the Roth IRA. So, Bob gives the mega-backdoor Roth IRA a try, given there are no income limitations with funding after-tax contributions in a 401(k). I had extensive discussions with Fidelity and they claim this is correct. Do I have to “hide” that balance when performing a Mega Backdoor Roth IRA from my 403b account? You can do the mega backdoor Roth in two ways — rollover within the plan or withdraw to a Roth IRA. I’m not repeating them here. And maxing out your Roth 401k or Roth IRA first. Just one quick question: I have both pre tax 401K and after tax 401K under the same plan and my plan allows in service distributions, when I convert after tax 401k to Roth IRA, do I have to follow pro-rated rule to recalculate taxable portion vs non-taxable portion? The mega backdoor Roth IRA best fits … Fidelity only sent one “combined” 1099-R. Thank you so much for the detailed response! Congress, in describing the rules regarding traditional and Roth IRAs, explicitly allows individuals of any income tax bracket to do a backdoor Roth conversion. If not, delete the Forms and start from the beginning. However, the documentation and tax forms for the process can be confusing, and you may run into trouble when it comes time to report everything to Uncle Sam. A mega backdoor Roth means making non-Roth after-tax contributions to a 401k-type plan and then taking the money out (with earnings) to a Roth IRA or moving it to the Roth account within the plan. Thank you very much! You then make a $5,500 non-deductible contribution to a traditional IRA with the intention of converting it to Roth tax-free. For more information on Backdoor Roth, see Backdoor Roth: A Complete How-To. If it had the word ‘Roth’, that’s your proof the IRA provider made the mistake and it gives you reason to ask them to correct that mistake. On the IRA conversion one when it asks you about your basis, you put in the number in box 5 from the 401k 1099-R. TurboTax can still do it. Then I transferred it to my Roth IRA account. Hoping for some guidance from the forum before I pull the trigger on my first rollover. Not all plans allow non-Roth after-tax contributions but some estimated that 40% of people can do it. About Form 8606, Nondeductible IRAs. About Form 5498, IRA Contribution Information (Info Copy Only). This is the guide that I use to enter a backdoor Roth into TurboTax. $100k was after-tax contributions to my 401k. Now, it depends on who made the mistake and how exactly you transferred the money to your Roth IRA. (2018, November 1). If the 401k provider processed your request to rollover to a Roth IRA as a rollover to a traditional IRA, which matched what actually happened, AND you did the transfer as a recharacterization (not a conversion), you don’t have any problems. Correct. If you can check all three boxes, let me introduce and explain the Mega Backdoor Roth strategy. Great summary, but I have one quick question: when asked “Did you make any after-tax contribution to your 401k plan? A CPA won’t help if the IRA provider doesn’t correct it because the CPA can’t change reality. Call the number on the notice and ask them what they need. Here’s how to avoid taxes on a Backdoor Roth Rollover. Check out Mega Backdoor Roth Explained to see how you might be able to do a backdoor Roth in your employer 401(k) plan. I have a question regarding my SEP IRA account. FWIW, I am much much younger than 59.5 years. You got here by making too much money to deduct Traditional IRA contributions or to contribute to a Roth IRA normally. While you were on vacation I had left you a question on another link on your spreadsheet calculations for Business income Mega door Roth amount.I am still waiting for an answer on that. Please note for an in-plan rollover to Roth 401k you would answer ‘Yes’ to the question after the 1099-R entries and follow from there. Box 2b “Taxable amount not determined” should NOT be checked. Because the assets can lose value again after you roll over, you are not any worse off by rolling over now versus if you had rolled over a month ago. This strategy is really for people who are maximizing their savings in other avenues first: 401k, IRA, HSAs, 529s. In 2017 I contributed about $15k after-tax, but since my plan only allows quarterly in-plan Roth conversions I ended up only being able to rollover $12k to my Roth 401k, which is what is listed on my 1099-R in box 5. I will definitely try it tomorrow. If you subsequently did the transfer as a conversion, you have a potential issue with paying tax twice. Form 8606 helps track your basis and avoid paying additional tax on your non-deductible contribution as you convert the balance to a Roth IRA. Please help. This article was exactly what I was looking for! Yes, you received a 1099-R form. The “Backdoor Roth“ and the “MEGA Backdoor Roth” are two tax loopholes that allow savers to bypass annual contribution limits for Roth IRAs. In other words, do I trip the pro-rata rule if I have a SEP IRA when doing a Mega Backdoor Roth conversion? Mastering the Mega Backdoor Roth IRA: What Is It and How to Execute If you knew a tool that could potentially maximize your retirement tax savings, would you be interested in it? A “designated Roth account” is the official name for what we usually call a Roth 401k. However, tax forms and reporting can be a daunting challenge. A mega backdoor Roth capability making non-Roth after-tax contributions to a 401k-style opinion after which taking the cash out (kredittlån earnings) to a Roth IRA or sharp it to the Roth fable correct by contrivance of the opinion.It’s a mountainous manner to save further cash into a Roth fable while not having to pay grand further tax. Import the 1099-R if you’d like. A Mega what? Step one of the Backdoor Roth IRA is making a non-deductible contribution to your Traditional IRA. An individual can contribute up to $19,000/year (under 50 years old) or $25,000/year (50+ years old) to a Traditional, or Roth 401(k). Most plans allow you to request in-service distribution only from the after-tax account. Roth IRA vs. Backdoor Roth vs. Mega Backdoor Roth: Roth IRA: Backdoor Roth: Mega Backdoor Roth: Funding Source: After-tax dollars: IRA rollover: 401(k) rollover: Annual Limit: Contribution limited to $6,000, plus an additional $1,000 for employees age 50 or over in 2019 Tom didn’t have any other Traditional IRA assets aside from his non-deductible contribution in 2018, and he didn’t have any earnings in his Roth IRA conversion. The downloaded software is way better than online software. 🙁. by Geoffrey Curran | Jun 25, 2019 | Geoff Curran, Jeff Barnett, Tech Focus, Wealth Enhancement. Thank you for the excellent articles on this site! I didn’t have any earnings/losses from this – so I thought “since I had already paid taxes on the contributions (they are after tax contributions after all), there was nothing here for me to report on form 1040” – so I left boxes 16a and b on form 1040 blank. Please scroll up and follow there. However, I just received a notice from the IRS yesterday, showing this $5k amount as taxable and ordering to pay back taxes of $2k. There you have it—a step by step on how to fund a Fidelity Backdoor Roth IRA. The whole point of mbd Roth is to contribute more tax advantaged dollars than is normally allowed. With a mega backdoor Roth, you got an extra $10k into your Roth account. posted on April 12, 2018 43 Comments. If you qualify for the 199A deduction, you might want to consider Roth and Mega Backdoor Roth 401(k) contributions. It’s a great way to put additional money into your Roth IRA without having to pay much additional tax. May I ask how do I find out whether the 401k provider processed the check correctly as a rollover to a roth IRA or not? You use form 5498 from your Roth custodian. 6 Minute Read . But for the portion I send to my Roth (original non-Roth after tax contributions) I receive another 1099-R with a distribution code of 1 (early distribution with no know exception). You might even have other options available for tax-advantaged savings that you haven’t considered. If you choose to contribute to a Roth IRA or to complete a backdoor Roth IRA conversion, you are choosing to be taxed now instead of later. So, answer the rollover and recharacterization questions correctly. Use Form 8606 for calculating the taxable amount from the conversion if you had any earnings in the Traditional IRA. Thanks again for the great tutorial. Box 7 code G. 2) I think this 1099R is for mega backdoor The backdoor Roth IRA is now explicitly legal, thanks to a footnote in the Tax Cuts and Jobs Act of 2017. If stressors like tax law changes, new forms and confusion around the whole process keep you from sleeping soundly, reach out to a Merriman advisor to discuss whether a backdoor Roth IRA makes sense for you. Retrieved from https://www.irs.gov/forms-pubs/about-form-8606, Internal Revenue Service. But if you’re not careful, you can be hit with a big tax bill when you do it. Blank does not mean zero 🙂 Thank you for confirming and your post; it has been very helpful! Guest. Back in 2016, when I first made the after-tax contributions to my 401k (about $5k), I wasn’t entirely sure on how to do the traditional/roth conversions – so I got scared and simply requested a withdrawal and encashed the check received. But for the 1099R from IRA provider, how do I make sure I only get taxed on the small earnings? About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.. Retrieved from https://www.irs.gov/forms-pubs/about-form-1099-r, Get the latest blog posts delivered directly to your inbox, Your Privacy | Important Disclosure | Contact Us | Jobs, Merriman | 800 5th Avenue | Suite 2900 | Seattle, WA 98104. A CPA can help you with the paperwork to report the reality only *after* the IRA provider corrects it. I'm on record disliking a Roth IRA, especially for high income earners. TurboTax wants to make sure the IRA/SEP/SIMPLE checkbox is not checked. You can then convert the extra after-tax … Tax time- Form 8606. Over the course of two years, you can max out your after-tax/Roth contributions to your 401k (say $30k per year extra). Solved: Hi, In 2017 I did a backdoor Roth IRA (contributed $5500 to traditional in 2017 and converted to Roth in 2017) and followed these instructions which. Some older posts may still contain non-functioning affiliate links. Thanks. This 1099R from IRA provider looks exactly like the one you would get by doing backdoor Roth as shown in your post “How To Report Backdoor Roth In TurboTax”. You just enter two 1099-Rs separately. Contributing above the limit through after-tax contributions into a traditional 401(k) can help you maximize your savings with potentially great tax benefits. It essentially … Note that the “taxable amount” is the full conversion amount ($5,510) and the box indicating that the taxable amount has not been determined is checked. Find “Form 1040” in the left navigation pane. That means you might be able to contribute an additional $20,000 or more after-tax each year after maxing your elective deferral and receiving your match. The mega backdoor Roth Solo 401k allows you to contribute more after-tax dollars than you would in a normal Roth IRA. So, answer the rollover and recharacterization questions correctly. If you distributed from the Roth 401k account to the Roth IRA, that explains why box 2a is zero. Next let’s look at Part 2 of Tom’s Form 8606, where the conversion portion is reported. If you did the transfer as a conversion AND you don’t have other traditional, SEP or SIMPLE IRA that creates a pro-rata issue, you also don’t have any problems. Please also see the following link: § Mega Back Door Roth Please let us know when you make voluntary after-tax contributions and convert to the Roth 401k sub-account so that we capture the information needed for 1099-R reporting. Rolling over within the plan is much easier, and many plans automate the process. If you qualify for the 199A deduction, you might want to consider Roth and Mega Backdoor Roth 401(k) contributions. A mega backdoor Roth conversion is very different than the standard backdoor Roth IRA conversion. Here’s why. If you did a Backdoor Roth, which involves making a non-deductible contribution to a Traditional IRA and then converting from the Traditional IRA to a Roth IRA, you need to report both the contribution and the conversion in the tax software. I think they are taxing this 15k. When you’re reporting a back door IRA, keep these things in mind if you’re using H&R Block’s online program or software: This isn’t a rollover or a recharacterization — it’s a conversion. Put that in the explanation of the amended return. It’s not true. If you use turbo tax and do a Mega Backdoor Roth, be prepared for some additional headaches. If you are paying an advisor a percentage of your assets, you are paying 5-10x too much. If line 18 is 0, as it is in this example, none of the conversion ends up being taxable. But here you have mentioned only @ 401K plan –Mega door if it allows. You trip it when you make an interim stop at a traditional IRA. 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