How to Convert a post-tax 401(k) to a Roth IRA

Converting a post-tax 401(k) to a Roth IRA is a process that may involve several steps and forms. It's important to note that there are two types of after-tax contributions in a 401(k): traditional after-tax contributions and Roth 401(k) contributions. The process to convert these contributions to a Roth IRA may differ slightly. Here are the general steps for both scenarios:

1. Determine the Type of After-Tax Contributions: Traditional After-Tax Contributions: If your after-tax contributions in your 401(k) are considered "traditional" after-tax contributions (i.e., not Roth 401(k) contributions), you will need to follow these steps:

2. Request a Distribution: Contact your 401(k) plan administrator or the financial institution managing your 401(k and request a distribution of the after-tax contributions. You may need to fill out a distribution request form.

3. Complete IRS Form 1099-R: The 401(k) plan administrator will send you IRS Form 1099-R to report the distribution. This form will indicate that the distribution is from after-tax contributions. There should be a box labeled "8" that is checked to indicate a "Code B" distribution (taxable amount not determined). This is because the tax treatment will depend on your subsequent actions.

4. Roll Over the After-Tax Contributions: Open a Roth IRA account if you don't already have one. b. Contribute the after-tax distribution amount into your Roth IRA within 60 days. Be sure to deposit the entire distribution, including the earnings on the after-tax contributions, into the Roth IRA to avoid any taxation.

5. File Your Taxes: Report the conversion on your income tax return. You may need to file Form 8606 to document the conversion.

6. Pay Taxes (if applicable): If there were any earnings on the after-tax contributions while they were in your 401(k), those earnings may be subject to income tax. You'll need to include the taxable portion in your income for the year in which you made the conversion.

If your after-tax contributions in your 401(k) are Roth 401(k) contributions, the process is simpler:

1. Request a Distribution: Contact your 401(k) plan administrator and request a distribution of the Roth 401(k) contributions. You may need to fill out a distribution request form.

2. Roll Over the Roth 401(k) Contributions: a. Open a Roth IRA account if you don't already have one. b. Contribute the Roth 401(k) distribution amount directly into your Roth IRA. This rollover does not have tax implications, as Roth 401(k) contributions are already post-tax.

3. File Your Taxes: Report the Roth 401(k) to Roth IRA rollover on your income tax return for documentation purposes.

Please consult with a tax professional or financial advisor when performing such conversions, as there may be individual circumstances or nuances to consider. Additionally, tax laws can change, so it's essential to ensure you're following the most current regulations.