[Updated on January 29, 2025 with screenshots from H&R Block Deluxe downloaded software for the 2024 tax year.]
A Mega Backdoor Roth is totally different from a daily Backdoor Roth. It’s finished by making non-Roth after-tax contributions to a 401k-type plan earlier than transferring it to the Roth account inside the 401k-type plan or taking the cash out (with earnings) to a Roth IRA.
It’s an effective way to place extra cash right into a Roth account with out having to pay a lot extra tax. Not all plans enable non-Roth after-tax contributions however some estimated that 40% of individuals can do it.
Suppose you probably did a Mega Backdoor Roth final 12 months. You need to have acquired a 1099-R type out of your 401k plan supplier. You’ll have to account for it in your tax return. Right here’s the right way to do it in H&R Block tax software program. In case you use TurboTax or FreeTaxUSA, please see:
Use H&R Block Obtain
The screenshots on this submit are from H&R Block Deluxe downloaded software program. The downloaded software program is each inexpensive and extra highly effective than the net model. A consumer reported getting an error from the net model of H&R Block in remark #8. The H&R Block downloaded software program didn’t give that error.
In case you haven’t paid on your H&R Block on-line submitting but, you should buy H&R Block downloaded software program from Amazon, Walmart, Newegg, or Workplace Depot and swap to the downloaded software program. In case you’re already too far alongside together with your entries, make this your final 12 months of utilizing the net model and swap to the downloaded model subsequent 12 months.
Inside the Plan Or To Roth IRA
You are able to do the mega backdoor Roth in two methods — convert inside the plan or withdraw to a Roth IRA. Changing inside the plan is far simpler, and lots of plans automate the method. Transferring to a Roth IRA additionally works. See the earlier submit Mega Backdoor Roth: Convert Inside Plan or Out to Roth IRA?
Right here’s the situation we’ll use for instance:
You contributed $10,000 as non-Roth after-tax contributions to your 401(ok). By the point you transformed the cash to the Roth account inside the plan or transferred it to your Roth IRA, your contributions earned $200. You transformed $10,200 to your Roth account.
I’m utilizing 401(ok) as a shorthand. It really works the identical in a 403(b). In case you did a cut up rollover — after-tax contributions to a Roth IRA and the earnings to a Conventional IRA — and the plan administrator issued one 1099-R on your two rollovers, you’ll want to separate your 1099-R into two. See One 1099-R Type for Two Rollovers in TurboTax and H&R Block.
1099-R Entries
Go to Federal -> Revenue -> IRA and Pension Revenue (Type 1099-R). You’ll be able to import the 1099-R or enter it manually. I’m displaying guide entries.
Our 1099-R is a traditional 1099-R. Enter the numbers out of your 1099-R as-is. Ours appears to be like like this:
The gross quantity transformed to the Roth account exhibits up in Field 1. The earnings are in Field 2a. In case you didn’t have earnings in your rollover, Field 2a is zero. “Taxable Quantity Not Decided” beneath Field 2b is left unchecked. The quantity of your non-Roth after-tax contributions exhibits in Field 5. Field 7 has code G.
The IRA/SEP/SIMPLE field in Field 7 in your 1099-R ought to NOT be checked.
We’re not a retired public security officer.
Rollover Vacation spot
The Roth 401k account is formally a “designated Roth account” within the plan. Select “Designated Roth account” should you transformed inside the plan. Select “Roth IRA” should you took the cash out of the plan to your Roth IRA.
That’s it. It’s so simple as that.
Confirm on Type 1040
Now we confirm we’re taxed solely on the $200 in earnings, and never on the $10,000 non-Roth after-tax contributions.
Click on on “Kinds” within the high menu bar. Double-click on “Type 1040 and Schedules 1-3” within the varieties record and click on on “Cover Mini WS.”
Scroll down to search out Line 5. The gross quantity transferred to the Roth account exhibits on Line 5a. Line 5b exhibits you’re taxed solely on the earnings. In case you didn’t have earnings, Line 5b can be zero.
If you’re finished wanting on the type, shut the varieties window to get again to the interview.
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