Solo 401k Real Estate Roth Conversion | Roth 401k IRS Reporting

I spoke with you a few minutes ago about what paperwork is needed to deal with the Roth Solo 401k conversion. The Solo 401k was set up in 2012, around August.

A bank account was set up & most of the money was used to buy a duplex (to generate rents and appreciation). In December 2012 we decided to convert the 1 and only piece of real estate that is owned by the Solo 401k to Roth.

QUESTION: What paperwork is needed to report the Solo 401k Roth conversion on my tax return?

ANSWER: Since you already got the property appraised prior to the Solo 401k plan in-plan Roth conversion, an important step required by the IRS, and documented the conversion in writing by completing an in-plan Roth conversion form, make sure that you quit claimed the real estate deed from your Solo 401k to the Roth Solo 401k by simply adding the word “ROTH” to end of the Solo 401k name. While deeding the Solo 401k owned property in the name of the Solo 401k Roth might seem like a hassle and trivial now, you will be happy that you did 15 years from now when you go to sell the property or in the event of an IRS Solo 401k audit. By recording the deed in the name of the Roth Solo 401k, this will further confirm the conversion of the Solo 401k owned real estate to the Roth Solo 401k.

To report the in-plan Roth conversion, a Form 1099-R will need to be filed by us as your solo 401k provider by the end of February. You will also receive a copy in the mail for filing with your personal tax return. 

Here is how you will report the Solo 401k Roth conversion on your tax return:

If tax payer files Form 1040, report Roth Solo 401k conversion amount on line 16a and 16b.

If tax payer files Form 1040A, report Roth Solo 401k conversion amount on line 12a and 12b.

If tax payer files Form 1040RN, report Roth Solo 401k conversion amount on line 17a and 17b.

Lastly, if you haven’t already, make sure to setup a separate solo 401k bank account for holding the Solo 401k Roth income (e.g, rental income, gains from the sale of the real estate property down the road, as well as for paying ongoing expenses associated with the real property )

Thanks,

RP from Florida