"Mega Backdoor Roth" - How to determine pre-tax/after-tax and conversion?

[live4soccer7]

I have setup everything with Discount Solo 401k, however I am having a hard time getting some specific answers from them. I'm hoping I can tap into some information you guy may have from experience.

I have the Plan documents, the Trust bank account, a brokerage account under the trust as well. All funds will up as ROTH. I can contribute 19.5k as ROTH (after-tax) into the bank or brokerage account and note this on the check and my records. Do I simply do the same for pre-tax/employer contributions? How do I go about converting the pre-tax to after-tax conversions? Is there a form that I do this stuff with or some sort of formal documentation that I would receive before or after? If so, who provides it or where can I find it?

[live4soccer7]

Doing some more research and getting a response from Discount Solo 401k, it seems a lot of this is really up to your personal record keeping and then for the actual conversion you just file a 1099R at the end of the year.

I suppose here is another question for those that have this configuration. Are you utilizing a bank for this or simply a brokerage account and depositing directly to the brokerage account? I currently just have one account at each location and was considering opening a second account at each for pre-tax and after-tax and the showing a transfer from pre-tax to after-tax to help document the conversion in that manner as well. I could see how all that could get messy real quick.

Any opinion/suggestions are greatly appreciated. I have to finish all this up immediately and get it funded prior to the year end.

[live4soccer7]

So from reading this thread: https://forum.mrmoneymustache.com/taxes/anyone-execute-a-mega-backdoor-roth-in-solo-401k/

It seems like most are doing the following:
Fund After Tax ROTH 401k 19.5K 2020
Fund Pre-Tax 401K (25% of wages)
Convert Pre-Tax 401k Contribution to After Tax ROTH 401k
Rollover the After-Tax 401K ROTH (19.5k plus your 25% contribution that came from pre-tax employer contribution) to a personal ROTH IRA account


Is this correct? Will the 1099 will record the pre-tax conversion and also the rollover to a personal ROTH IRA?

If this is all true then there is really no sense in having a bank account and can just setup a 3 Fidelity accounts (Pre-Tax 401k, ROTH 401k, Personal ROTH IRA).

[billy]

Not quite, this breaks it down https://thecollegeinvestor.com/17561/understanding-the-mega-backdoor-roth-ira/

Your moving after tax 401k $ to your roth ira.

[live4soccer7]

Yes, you can see that in my last step. With something such as Discount Solo 401k's document plans they also allow for in plan conversions. This makes it so you could convert your pre-tax to after tax as well.

Can someone confirm this?

[live4soccer7]

For anyone following:

I just called Justin over at discount solo 401k and he confirmed I was correct on the abilities. Calling is a much better option. They are very helpful either way, but it was so much faster that way.


You can do in plan conversions and out of plan rollovers if you want. I don't really see the point of an out of plan roll over unless you want to take distributions/withdrawals from your contributed amount. The 401k they setup allows for SO MUCH MORE than a normal ROTH IRA can do. Also, once you roll over to a ROTH IRA you can not get those funds back into the 401k. It is a ONE way street.