Is this process correct for Schwab after tax to ROTH IRA contribution?5 Replies
March 4, 2022 at 8:18 am
I would like to make sure this is the correct process for the mega backdoor Roth process (assuming deposited amounts are under the limits):
Step 1 – Transfer $ from my corporate banking account to my personal Schwab Brokerage account via online transfer.
Step 2 – Internal transfer from personal Schwab Brokerage Account to After Tax corporate account. Via Schwab internal transfer form.
Step 3 – Internal transfer from after tax corporate account to personal Schwab ROTH IRA via Schwab internal transfer form.
Step 4 – complete form on solo401k.net webpage (https://www.mysolo401k.net/after-tax-solo-401k-to-roth-ira-conversion-form/) for creation of 1099-R for next year
I would double this for myself and my spouse.
Top ForumsSolo 401k, Solo 401k ContributionsMarch 6, 2022 at 9:25 am
What you describe is correct other than simply clarifying that the after-tax account is under the name and EIN of the Solo 401k and not a “corporate” account.
Please see more at the following page:
March 7, 2022 at 2:33 pm
I spoke with Schwab today and was a little concerned they didn’t quite understand what I was trying to do.
For step 2 – internal transfer from personal brokerage to Trust acct (after tax), they said I needed to send a Letter of Authorization (LOA), which sounded correct.
For step 3 – moving from Trust (after tax) acct to my personal ROTH IRA, they requested I fill out the following – Qualified Retirement Plan (QRP) Distributinon Request Form (https://client.schwab.com/secure/file/P-2297996/APP20029-11_Final_fill.pdf) and complete Section 6 D. The rep kept mentioning “conversion” but I didn’t think it would be a conversion as more of a transfer from trust (after tax acct) to individual roth ira.
Sorry for the questions. This is the first time I have done this and want to avoid any mistakes.
Top ForumsSolo 401k, Solo 401k ContributionsMarch 8, 2022 at 2:51 pm
First, please note that Schwab is merely the custodian of the cash (and other traditional investments such as any mutual funds, publicly traded stocks, etc.) in the 401k. As such, Schwab will not report the transfer as a withdrawal or taxable distribution. We handle the ongoing compliance support in the event of a rollover/taxable distribution.
Moreover, many of the folks working in the call center may be confused about the correct process.
Here the correct form to move funds from a voluntary after-tax sub-account at Schwab to a Roth IRA at Schwab is referred to as the “Move Money” form by Schwab. Please ask Schwab for the most recent version of the form and then complete it accordingly.
Top ForumsSolo 401k, Solo 401k ContributionsJune 18, 2022 at 12:26 pm
I would also want to convert my Schwab After Tax 401k to a Schwab Roth IRA (mega backdoor) and was having some trouble with finding the correct Schwab transfer form.
George, I found a “Move Assets from My Schwab Brokerage Account” form link below. Is this the correct form to use for (Schwab After tax solo 401k to Schwab Roth IRA transfer)?Dan D.
June 19, 2022 at 5:36 am
That’s the form that I used. This is what I sent to Schwab via the “message center”
“I am making the following movement of money:
Step 1 – Move $26,000 from brokerage account (#1) to after tax account (#2).
Step 2 – Move $26,000 from after tax account (#2) to ROTH IRA (#3)
The forms for each step are attached.
I will have my plan administrator prepare the appropriate tax documents (1099-R).
If you have any questions, please let me know.
I attached 2 copies of the form you linked. One form for step 1, and a second form for step 2. Hope that helps. It took them a few days, but seems to have gone smoothly.
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