1099-R mega backdoor Roth

Hoping for confirmation if the below is correct:  solo 401k plan.  Owner doing the mega backdoor Roth.  Contributes $30,000 after-tax in 2023, converts $30,100 to a Roth IRA in 2023.  The 1099-R would be as follows:

box 1:  $30,100.00

box 2a taxable:  $100.00

box 5: $30,000.00

Box 7:  G

Does this look correct?

Thank you

From your question, it sounds as if the participant:

• contributed $30,000 to the 401(k) plan in 2023.
• the contribution earned about $100 in income.
• the after-tax account balance of $30,100 is being distributed as a rollover to a Roth IRA.

If so, the 1099-R reporting looks correct.

If your question was the intended to ask if the participant:

• contributed $30,000 to the 401(k) plan in 2023.
• the contribution earned about $100 in income.
• the after-tax account balance of $30,100 is being converted to Roth as an In-plan Roth Rollover (IRR).

If this is the case, then you also should complete Boxes 10 and 11 on the 1099-R (and visit IRS Notice 2010-84, Q/A-13 before doing so).

Changing topics, sort of, all of the moving money around and tracking tidbits of income on after-tax contributions to make a "mega backdoor Roth" could be avoided if the participant designates a profit sharing contribution as an Employer Roth contribution.  As a one-participant plan, the contribution could be up to the annual additions limit ($69,000 for 2024, plus catch-up if eligible).  The contribution will be taxable in the year it is made.

Life will be much simpler for everyone involved.

The above is the correct assumption so thank you for your comments.  I found it a little odd that with the taxable amount being $100, that a code in addition to "G" in box 7 would apply.  

Thank you

5 hours ago, Paul I said:

participant designates a profit sharing contribution as an Employer Roth contribution.  As a one-participant plan, the contribution could be up to the annual additions limit ($69,000 for 2024, plus catch-up if eligible).

I understand Roth is ultimately taxable, but if profit sharing at first, is it not subject to the 25% deduction limit that would otherwise apply? Or are you assuming based on the numbers above that it's an issue in this case?

I think the simplest way (and what gets done the most? opinions?) is contribute VAT and then do immediate in-plan Roth conversion before any investment experience, leave in the plan as Roth and not even bother with IRA.

On 2/9/2024 at 8:11 AM, Paul I said:

If your question was the intended to ask if the participant:

• contributed $30,000 to the 401(k) plan in 2023.
• the contribution earned about $100 in income.
• the after-tax account balance of $30,100 is being converted to Roth as an In-plan Roth Rollover (IRR).

If this is the case, then you also should complete Boxes 10 and 11 on the 1099-R (and visit IRS Notice 2010-84, Q/A-13 before doing so).

I believe Box 10, Box 11, and IRS Notice 2010-84, Q/A-13 refers to distribution from a Roth 401k that originated from an In-Plan Roth Rollover (IRR) made within the past 5-years.

Instructions for 1099-R (2024) states:

• Designated Roth account distributions. If you are making a distribution from a designated Roth account, enter the gross distribution in box 1, the taxable portion of the distribution in box 2a, the basis included in the distributed amount in box 5, any amount allocable to an IRR made within the previous 5 years (unless an exception to section 72(t) applies) in box 10, and the first year of the 5-tax-year period for determining qualified distributions in box 11. Also, enter the applicable code(s) in box 7.

• Distributions allocable to an in-plan Roth rollover (IRR). The distribution of an amount allocable to the taxable amount of an IRR, made within the 5-year period beginning with the first day of the participant’s tax year in which the rollover was made, is treated as includible in gross income for purposes of applying section 72(t) to the distribution. The total amount allocable to such an IRR is reported in box 10. See the instructions for Box 10. Amount Allocable to IRR Within 5 Years , later. An IRR is a rollover within a retirement plan to a designated Roth account in the same plan.

In the case where an after-tax account balance of $30,100 is being converted to Roth as an In-plan Roth Rollover (IRR), since this a conversion and NOT distribution, my interpretation is that the following IRS Instructions for 1099-R (2024) apply:

• For a direct rollover of a distribution from a section 401(k) plan, a section 403(b) plan, or a governmental section 457(b) plan to a designated Roth account in the same plan, enter the amount rolled over in box 1, the taxable amount in box 2a, and any basis recovery amount in box 5. Use Code G in box 7.