All-in pre-tax to my company's 401k-Roth Contributions, do I lose my $7500 Catchup Contributions?

[howjltx]

In 2025 If I contributed all my $23,500 pre-tax dollars straight to my 401K-Roth (Mega Back Door Roth Conversion) will this disqualify my catch-up contribution? The reason I ask is neither my 1099-R nor my W-2 form shows the $23,500 pre-tax to the IRS, is this hidden in TurboTax (desktop premier) Forms?

[dmertz]

A Mega Backdoor Roth involves an In-plan Roth Rollover of after-tax contributions made the the traditional 401(k) account, not pre-tax contributions.  The code-G Form 1099-R that reports the IRR will show the after-tax amount in box 5.  After-tax contributions to the 401(k) are not reportable on a W-2 or anywhere on your tax return.

After-tax contributions to a 401(k) are not elective deferrals and are not subject to the $23,500.  If employee Roth contributions were made directly to the Roth IRA, those are after-tax Roth contributions that have nothing to do with any sort of backdoor.

[howjltx]

I beg to differ W2 line 12a code AA is the answer I was looking for, when I asked AI (which I still find it to be correct only 70% of the time, so please correct me if I am wrong) AI(it) said I need to add my W2 12a. code D (tax deductible 401K) to my 12c. code AA (pre-tax 401k converted immediately to ROTH or you will have a small taxable amount). Where my concern was if I did not meet the 2025 $23,500 contribution limit, my $7,500 catch-up contribution would be denied. This happened to me in the early stages of the Catch-up contributions). Then I was <$50 short on my W2 of meeting the maximum 401k contribution for that year and assumed it would be overlooked and I could take the catch-up contribution for that year. After April 15 IRAss sent me a letter saying my catch-up contribution was denied and that I need to not only pay taxes on it for the current year, but also for the previous year. So here I am now, making sure I don't receive another IRAss  (sticky keys?) plunge that I do not want. 

What I think is happening now, is the IRS can't see that I only contributed $23,420 towards my $23,500 limit last year but since I did the $7,500 catch-up contributions, they are only looking at the sum total to be above $23,500.  Can someone much tax smarter than me confirm this, or at least clarify it.

[dmertz]

Are you asking in regard to preparing your individual tax return or are you asking on behalf of the corporation that provided the W-2, perhaps prepared incorrectly?

With regard to preparing your individual tax return, you must enter the W-2 exactly as it was prepared by your employer.  You are not permitted to enter into box 12 of TurboTax's W-2 form anything that is not on the W-2 provided by your employer.  If the employer provided an incorrect W=2, your employer must correct the W-2.

Any catch-up contribution that you made will already have been included in box 12 by your employer.

A Mega Backdoor Roth does not involve any code-AA contributions.  Only ordinary employee contributions  made directly from pay to the designated Roth account in the 401(k) plan are to be reported with code AA in box 12 of the W-2 provided by your employer.

[howjltx]

Me, using TurboTax premier. My company's W2 has 12.a code D around $10K (401k tax deductible); W2 line 12.c has Code AA (pre-tax converted directly to ROTH) at ~$20K. I am entering this exactly as stated on the W2.

You speak of Line 12 in general, I speak of line 12a and 12c. I also have line 12. b., d. and e. (these are ill relevant to this issue). 

Spoke with my company's Fidelity 401k plan administrator, where what we were trying to figure out was on my W2, line 12.c Code AA (pre-tax directly converted to ROTH) needs to be added to W2 line12a. Code D (pre-tax to 401k deductible contribution). I think my mistake was I thought both of these needed to add up to the $23,500 + $7,500 catchup = $31,000, but I am beginning to suspect IRS cannot tell if the actual $23,500 basic (I am currently short by $85.50, which I will correct this before filling and April 15) 401k contribution was met since both basic and catchup are mixed in the W2 Code D & Code AA, so I suspect the IRS accepts anything over $23,500 as catch-up (was not like this before, one year I was less than $50 short on my basic contribution, where the IRS disqualified by catch-up, then made me pay double taxes for both the current year along with taxes for the previous year; don't want that to ever happen again). Just trying to get confirmation since I will never trust AI(it) t 100%

[dmertz · Accepted solution]

Box 12 of a W-2 has four sub-boxes, a, b, c and d,  allowing for up to 4 separate box-12 items to be reported.  It doesn't matter which sub-box contains which item, so I ignore that detail, but they should be entered into TurboTax in the same boxes as on the W-2 provided by the payer.

Code AA indicates an employee contribution made directly from pay to the designated Roth account, no conversion involved.  It does not pass through the traditional account.  This contribution is after-tax so it does not reduce the amount of wages that the employer reports in box 1 of your W-2.

Your catch-up contribution is the generally the amount that is in excess of the regular $23,500 limit.  However, catch-up contributions for highly compensated employees are required to be made as Roth contributions.  Roth contributions don't have to be catch-up contributions, so it would seem that you have $23,414.50 of regular traditional elective deferrals, $85.50 of regular Roth contributions and $7,414.50 of catch-up Roth contributions.  I don't see where there is anything wrong with that from a tax perspective with total contributions of $30,914,50 and all of your catch-up being Roth.  What matters if you are a highly-compensated employee is that the amount reported with code D in box 12 is no more than $23,500 for 2025 because catch-up contributions for highly-compensated employees are required to be Roth contributions.

If your employer matching contributions are Roth, they are reported on a code-G Form 1099-R.  The employer takes a deduction for these contributions, but you are required to pay the tax to make the contributions after-tax, so that's why the code-G Form 1099-R.  It makes the transaction look like a conversion, but the funds never actually move through your traditional 401(k) account.

Unless the payroll department made a mistake by not taking the remaining $85.50 from your pay and depositing is as a traditional 401(k) elective deferral, I don't see how that could be corrected now.  If it was their mistake and they correct that, they will have to provide you with a corrected W-2 showing an updated code-D amount in box 12.

Regarding your 2024 catch-up contribution being denied, I suspect that you are a highly-compensated employee and that catch-up contribution was made to the traditional account, not to the Roth account, violating the requirement that catch-up contributions for highly-compensated employees for 2024 and beyond be Roth contributions.  (Many employers in 2024 had not yet modified their plans to have designated Roth accounts, so highly-compensated employees at these companies were not permitted to make catch-up contributions.)

[howjltx]

I Thank you for your patients with me. The following that is underlined is spelled out on my last paycheck:
Last year I was an HCE, for my catch-up contributions, I put $2,700 pre-tax into 401k and $4,800 after-tax into Roth

(do I need to correct this before Apr 15 by having the $2,700 moved to Roth along with paying taxes on this?)

On W2, Line 12 Code D is less than $9K and Line 12 Code AA is >$20K

Since I was limited to 14%, I did not contribute the full $23,500 so I got a second job and opened a solo-Roth 401k and contributed to Schwab, I am still $85.50 short of the $23,500, so I will contribute the shortfall in the solo-Roth 401k

My denied catch-up contributions occurred 20+ years ago after the IRS started the $1,000 catch-up amount. that was when both the limit and catchup amount was reported to the IRS, I was ~50 short of the normal contribution limit and they double penalized me because I did not correct this before April 15 

This year I am not HCE since I reduced my working hours last year.

[dmertz]

As a HCE for 2025, if you contributed $2,700 as pre-tax catch-up, that needs to be corrected, otherwise it's treated as an excess contribution.  This would need to be distributes as a return of the excess contribution.  Unless the plan can treat it as their error, I don't think that it can be moved to the designated Roth account.  However, based on the amount shown with code D and code AA in box 12 of your W-2, it would seem that the $9,000 could be considered to be part of your regular elective deferral, not catch-up.  Ask the plan administrator.

"I got a second job and opened a solo-Roth 401k and contributed to Schwab"

Unless you had income from self-employment or the this second job was at your own company, I don't see how you were eligible to open a solo 401(k).

[howjltx]

I will contact my plan administrator to see how to handle the excess contribution.

As for your comment "$9,000 could be considered to be part of your regular elective deferral, not catch-up." I too do not know how the IRS could distinguish this either being regular elective deferral or catch-up". If it is being tract, my guess is it would be within TurboTax Forms

My second income was from self-employment so that is how I did the solo-401K.

THX! for helping me resolve this.