How to report 401k after tax roth contributions?

[yatoshura]

My company offers a 401k plan which I maxed out in 2024. Then I followed Fidelity's instruction to do a Roth IRA conversion and contributed another $14K with my own after tax fund. I did not contribute to a separate traditional IRA for 2024.

Do I need to report this type of contribution when filling my taxes?

If so, what steps should I follow? I did not see such options when asked about traditional and Roth IRA contributions.

I also tried report the $14K as Roth contribution, but TurboTax indicate there would be a penalty.  

Appreciate any help.

[DanaB27]

To clarify, did you directly make a Roth IRA contribution of $14,000 for 2024? If yes, then you have an excess contribution and need to request the withdrawal of excess contributions plus earnings by the due date to avoid the 6% penalty. Please see IRA contribution limits. The earnings will be taxable in the year you made the contribution.

If you made an excess contribution in 2024 and withdrew the 2024 excess Roth IRA contribution plus earnings in 2025 before the due date, then you will get a 2025 Form 1099-R in 2026 with codes P and J. This 1099-R will have to be included on your 2024 tax return and you have two options:  

• You can wait until you receive the 2025 Form 1099-R in 2026 and amend your 2024 return or
• You can report it now in your 2024 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2025 Form 1099-R into the 2025 tax return since the withholdings are reported in the year that the tax was withheld. The 2025 code P will not add anything to your income in the 2025 tax return but the withholdings will be applied to 2025.

To enter a 2025 Form 1099-R in your 2024 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2024?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
11. On the "Which year on Form 1099-R" screen say that this is a 2025 Form 1099-R.
12. Click "Continue" after all 1099-R are entered and answer all the questions.
13. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2023" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2024.

Also make sure you indicate in the IRA contribution interview that you withdrew the excess contribution by the due date:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Enter the Roth IRA contribution
5. Continue until the penalty screen and enter the excess contribution amount withdrawn.

[yatoshura]

@DanaB27 

I did not directly make a Roth IRA contribution because I'm ineligible. The 14K contribution was made through Fidelity's mega backdoor Roth.

For more information:

https://www.fidelity.com/learning-center/personal-finance/mega-backdoor-roth

I contributed 14K after-tax fund to my 401K account and then converted to Roth IRA using Fidelity app.  I have not made any withdrawal. How do I report this type of contribution?

Thanks for the help.

[DanaB27]

You should have gotten a Form 1099-R to report the conversion to the Roth IRA. You can indicate in the follow-up questions that it was converted to the Roth IRA. Do not enter anything in the IRA contribution section.

I assume you got a Form 1099-R with code G:

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Enter the Form 1099-R information
4. On the "Did you move this money from a 401(k) to a Roth 401(k)?" screen answer "No"
5. On the "Did you move the money to a Roth IRA?" screen answer "Yes"
6. Say "Yes" to "Did you make after-tax contributions"

[yatoshura]

@DanaB27 

I did not receive a 1099-R form. The $14K seems to be invested automatically by Fidelity into Vanguard target date funds after I deposited into the 401K account.

Do I still need to report if the $14K is after-tax contribution?

[DanaB27]

To clarify are the funds still in the 401k account? Then there is nothing else to report. 

But if you moved the funds to a Roth IRA or Roth 401k from the 401k in 2024 then you should have a 2024 Form 1099-R. Please check with Fidelity.  

[yatoshura]

@DanaB27 

Correct, the $14K was contributed to my work's 401K account using Fidelity's in-plan conversion option. I did not withdraw. I checked my 401K account and saw the $14K was automatically used to buy more shares of the Vanguard target date fund.

Does this mean my mega backdoor contribution is incomplete if the funds are still in my 401K account?

[DanaB27]

Yes, you only made the first step in the mega backdoor Roth strategy. The second step is to convert the after-tax contributions to a Roth 401(k) or Roth IRA.

[yatoshura]

@DanaB27 

I believe I have also completed the second step. When I make the after tax contribution on the Fidelity app, there is also a checkbox that I selected for in-plan conversion. Doesn't that mean the conversion would happen automatically inside my existing 401K account?

[DanaB27]

It might be best to check with Fidelity. If you made the in plan conversion then you should have a Form 1099-R reporting this.