Undoing mega backdoor Roth

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bob1234
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Joined: Fri Jan 20, 2012 2:09 am

Undoing mega backdoor Roth

Post by bob1234 »

I wanted to understand the impact of undoing a mega backdoor Roth (specifically after-tax 401k to Roth IRA rollover) if it were to be disallowed this year retroactively.

1. If I just make the contribution to the after-tax 401k, but don't do the rollover, and withdraw the contribution, would I just owe taxes on the earnings or would there be any penalty?

2. If I do the rollover to Roth IRA and then need to withdraw due to ineligible conversion, would there be a penalty and how are the earnings for that conversion determined (pro rata?)
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JoMoney
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Re: Undoing mega backdoor Roth

Post by JoMoney »

bob1234 wrote: Thu May 12, 2022 8:13 pm...if it were to be disallowed this year retroactively....
On a side note, my first reaction was, "They can't make retroactive laws" :shock: , but then I learned that the part of The Constitution that says “No Bill of attainder or ex post facto Law shall be passed”, was determined in prior cases to only apply to criminal law and not necessarily tax law :annoyed

I still would like to think that such a thing would be highly frowned on. It can't be good for the economy for people to not have some semblance of predictable rules for how they'll be taxed.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
invest4
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Joined: Wed Apr 24, 2019 2:19 am

Re: Undoing mega backdoor Roth

Post by invest4 »

Talk to your plan provider.

If it happens (I am highly doubtful), I will worry about it then.
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oldcomputerguy
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Re: Undoing mega backdoor Roth

Post by oldcomputerguy »

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