Generally, there are two ways to execute the Mega Backdoor Roth Conversion:
Voluntary after-tax contributions --> in-plan Roth conversion to Roth 401k
Voluntary after-tax contributions --> in-service distribution to Roth IRA
How & Where to File IRS form 1099-R
If you have an active Solo 401k plan, our 1099-R generator will prepare and file IRS form 1099-R for you for assets held in your Nabers Group Solo 401k. It covers both mega backdoor Roth methods (code G), as well as normal distributions (code 7) and early distributions (code 1). See Who generates the 1099-R filing? for the full list.
Click here to use the Solo401k.com 1099-R generator.
You must submit your form by January 20th for the previous year's conversions. If you miss the January 20th deadline, you will need to work with your CPA to complete the filing.
In-Plan Roth Conversion: After-Tax Funds to Roth
If you are implementing a backdoor Roth conversion, you might make voluntary after-tax contributions to the Solo 401k plan and then decide to convert those funds in-plan to Roth.
Generally, converting after-tax contributions to a Roth 401k is not a taxable event. That's because you didn't claim a deduction on the initial contribution. Therefore, the IRS does not expect any taxes on the conversion.
The gross distribution is the amount you are converting to Roth in-plan. However, because you are converting after-tax contributions to Roth, the taxable amount in box 2a is $0. Per IRS instructions, enter the amount as -0-.
Similar to the after-tax to Roth conversion, the payer will be listed as the 401k trust and the recipient will be you as the plan participant.
Enter the amount of voluntary after-tax conversions in box 5 as the basis for your conversion. We strongly recommend completing the conversion before the after-tax funds have had any growth (this growth is taxable).
For Box 7, enter Distribution code G as this is a direct rollover inside your qualified plan. As long as there is no growth on your after-tax contributions (move contributions only), there should be no taxes owed on the in-plan Roth conversion/direct rollover.
In-Service Distribution: Move Money to a Roth IRA
Another strategy of the Mega Backdoor Roth conversion is to backdoor funds into a Roth IRA. Simply put, the Solo 401k account holder can make large voluntary after-tax contributions to the Solo 401k plan. Those contributions are then moved to a Roth IRA via an in-service distribution.
In this instance, the PAYER is the Solo 401k trust. Enter the Solo 401k trust name, Solo 401k trust EIN, and Solo 401k trust address on IRS form 1099-R.
For the RECIPIENT, enter your name, your address, and your social security number. You do not need to enter the Roth IRA custodian information.
Similar to the after-tax to Roth conversion, the taxable amount in box 2a is -0- as you are moving after-tax funds to another after-tax account.
Just like moving funds from an after-tax account to Roth 401k, you'll use Distribution Code G in box 7, which is for a direct rollover of a distribution (other than a designated Roth account distribution) to an IRA or another qualified plan.
When to File
IRS form 1099-R must be provided to the recipient by January 31st. The IRS expects its copy to be filed by February 28th if filing on paper, or by March 31st if filing electronically.
If using the 1099-R generator in your Solo401k.com app, you must submit your form by January 20th for the previous year's conversions. If you miss the January 20th deadline, you will need to work with your CPA to complete the filing.