Ask an AI Accountant

A backdoor Roth 401(k) conversion isn't a term commonly used because the "backdoor" strategy is typically associated with a Roth IRA, not a 401(k). However, if you are talking about converting traditional 401(k) funds to a Roth 401(k) within the same plan, here's how you report it: 1. When you convert money from a traditional 401(k) to a Roth 401(k), the converted amount will be treated as taxable income. Your plan administrator should provide you with a Form 1099-R that reports the taxable amount of the conversion. 2. Include the total distribution in Box 1 and the taxable amount in Box 2a of Form 1099-R. The code in Box 7 should be G, which indicates a direct rollover to a qualified plan. 3. When you file your taxes, report the taxable amount from the Form 1099-R on your Form 1040, U.S. Individual Income Tax Return. This income will be added to your adjusted gross income (AGI) and taxed at your ordinary income tax rates. Keep in mind that making a conversion from a traditional 401(k) to a Roth 401(k) could potentially push you into a higher tax bracket, so consider the tax implications. Additionally, it's crucial to have the money to pay the taxes on the converted amount, as you'll be paying them in the year of the conversion. If you meant a backdoor Roth IRA conversion, the steps are different. In that case, feel free to ask, and I would be glad to explain the process for a Roth IRA conversion.