Pro-rata rule clarification

[Not2Late]

Making a new topic for this question, but based on the previous topic I posted (https://forum.mrmoneymustache.com/taxes/401(k)-after-tax-contributions-investment-order-question/):

I know a new grad with a new job.  The new job has Traditional 401K, Roth 401K, and after-tax 401K options with in-plan Roth conversions.  The new grad has small Traditional IRA and slightly larger Roth IRA with the option for the 401k to take IRA rollovers.  If they are interested in the mega back door Roth angle next year, do they need to roll the traditional IRA into the 401k?  I have been reading about the pro-rata rule, but it seems to refer to IRA conversions only.  Does this affect the kind of in-plan Roth conversions this particular 401k allows?  It doesn't seem so from the various sites I have read, just looking for a citation somewhere that indicates 401K conversions are not affected/do not require an 8606.  Thanks!

[seattlecyclone]

The traditional IRA does not need to be rolled into the 401(k) to do the mega backdoor Roth. This is only necessary for the non-mega backdoor.

[Not2Late]

That is what I thought. Thanks for confirming.

[terran]

This is because traditional IRA to Roth IRA conversion (regular backdoor Roth) go on form 8606, which considers IRA basis. After-tax 401(k) distributions that are rolled into an IRA or converted in plan to Roth 401(k) go on form 1040 lines 4a and 4b.

[Not2Late]

Thanks for the additional explanation. It helps me to understand and internalize it. This really is a great place!

[seattlecyclone]

This is because traditional IRA to Roth IRA conversion (regular backdoor Roth) go on form 8606, which considers IRA basis. After-tax 401(k) distributions that are rolled into an IRA or converted in plan to Roth 401(k) go on form 1040 lines 4a and 4b.

Yeah, the mega backdoor is so much easier from a paperwork standpoint. With after-tax IRA conversions you have to supply enough numbers and do enough calculations to fill out a whole form 8606. With the mega backdoor the 401(k) company figures out the taxable amount for you, and they issue you a 1099-R containing two numbers (total conversion and taxable part) that you just copy straight to your tax return.