IMPORTANT: Before performing a Roth conversion, please make sure to educate yourself on the mechanics and consequences of Roth conversions. This is a taxable event. We always recommend that clients speak with their accountant prior to performing a Roth conversion in order to understand the tax consequences.
If you would like to perform a Roth conversion, you will need to do the following:
- Complete the In Plan Roth Conversion form, located HERE under Miscellaneous Forms.
As Plan Administrator, you will need to keep the original as part of your recordkeeping.
- Report the Roth conversion through Form 1099-R. The Roth conversion will be included as part of this year's taxable income.
If you would like us to assist you in creating a 1099-R, please contact us at the beginning of the following year to request this service. We will need a copy of your completed In Plan Roth Conversion form in order to have a 1099-R issued by your Solo 401k.
Note that you are not able to rollover funds from your previous pre-tax account(s) directly into the Roth bracket. If you decide to do the conversion, you will first have to move those funds into the pre-tax portion of your Solo 401k, and then do the conversion and move the funds into the Roth.
Finally, we do recommend keeping the pre-tax and Roth funds separate by opening two separate bank accounts. This is for ease of accounting.