I work for a tech company that has an employer-sponsored retirement account.
The account allows us to make contributions to Roth 401(k). We also have the options to make pre-tax or after-tax 401(k) contributions and convert them to the Roth 401(k) by automatic "in-plan" conversions. I think in IRS Pub. 575 this is referred to as an "in-plan Roth rollover" and the plan is a "Designated Roth Account."
I received a 1099-R where the Box 7 is Code G which is what should be selected for "in-plan Roth rollovers that are direct rollovers" and some other cases as well.
After I enter this information, it asks several other questions. I noticed that the answers to these questions can change whether the word "ROLLOVER" appears on the margins for line 5b of the 1040 tax form.
Because those questions don't directly ask about "in-plan Roth rollovers" it's unclear to me how I should respond to them in this situation with an in-plan Roth 401(k) that converts after tax dollars to the Roth 401(k).
This rollover is all within the same employer plan ("in plan"). It is different from rolling an external 401(k) into Roth 401(k).
- after submitting the 1099-R information, there is a question about whether or not the money for the Roth 401(k) came from a 401(k). However it is not clear whether they mean an in-plan 401(k), an out-of-plan 401(k), or maybe they mean to write yes if it is either of those two. I wrote yes because technically a Roth "in-plan" rollover is from a pre-tax or after-tax 401(k) in the plan to a Roth 401(k) in the plan.
- the next question is about whether or not I contributed "after tax" dollars not mediated by my employer. I am unsure what this means--we are given to option for our after tax contributions to be made to our employer's account, but it is all mediated by an automated system. I haven't made any manual effort like sent in a check to make more after tax contributions, it is all handled by my employer. But the dollars that were rolled over were in fact "after tax" 401(k) dollars that my employer put into the plan then automatically converted to Roth 401(k) in the same plan.
Lastly, depending on how I answer these two questions, it seems to impact whether "ROLLOVER" appears on the margin for box 5b or not. I read somewhere that the for the 1099-R, if the box 7 is coded as "G" it should probably say "ROLLOVER" on the 1040 form box 5b. However, it seems to depend more on the answers to the two questions above than what is in the 1099-R.
Can you please clarify how in-plan Roth conversions are to be entered into this tool, and whether or not "ROLLOVER" should be included or not? I am particularly interested in the case when after tax dollars are what were put in the account by the employer, and then they get an in-plan conversion to Roth 401(k) (NOT an external Roth IRA).
This is the typical "mega-backdoor" set up that some tech companies use and is not the same thing as rolling over into a Roth IRA. It's all Roth 401(k), and "in-plan" conversion.
