This year my income is lower and my accountant suggest that I convert into Roth my Solo 401k pre-tax contributions for salary deferrals as well as profit sharing.
Can I do that under your plan and if so what is the procedure?
To process a Roh in-plan conversion, we need the following.
IMPORTANT: If you want to process a Roth Conversion for this tax year , the conversion forms must be completed and FUNDS must be deposited to the ROTH ACCOUNT by 12/31.
Yes the plan allows for Roth conversions.
Please find attached for your completion and signature the following two documents for documenting the in-plan Roth conversion.
- In-plan Roth Conversion Form (please sign twice--as participant and administrator)
- Tax Notice (for your records only)
IMPORTANT: A separate bank account must be setup to hold the ROTH SOLO 401K FUNDS including future investment gains.
If real estate property or any other alternative asset is also being converted to a ROTH Solo 401k, the assets must be appraised prior to the conversion. The IRS is very strict with respect to this asset valuation requirement.
The real estate property or alternative investment also must be re-registered as outlined above.
Please return by e-mail or fax to my attention signed copy of the In-plan Roth Conversion Form
How is an in-plan Roth conversion reported by MySolo401k.net to the IRS?
The account value converted to a Roth is taxable in the year of the conversion and the amount converted is included in the Solo 401k owner/participant gross income for the tax year.
MySolo401k.net will report the total in-plan Roth conversion on Form 1099-R for the year in which the conversion occurs.
MySolo401k.net will mail copy of Form 1099-R to the Solo 401k plan owner/participant by end of January and a copy to the IRS by end of February.
The Solo 401k owner/participant will also need to file copy of Form 1099-R with his or her tax return by April.