after-tax 401k contributions

Posted by Yuri Shtil on June 15, 2007, 12:41 am

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My new employer offers a 401k with both before-tax and after tax
contributions. Has anyone come across this? How would you set up the 401k
account in Quicken if contributions are both before-tax and after tax?

Posted by JM on June 15, 2007, 11:15 am

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> My new employer offers a 401k with both before-tax and after tax

> contributions. Has anyone come across this? How would you set up the 401k

> account in Quicken if contributions are both before-tax and after tax?

Yes, I took advantage of it back when I was still getting a paycheck.

I'll assume you are using QW's 'Paycheck' and QW's 401k account.

Enter your pre-tax contributions and employer match [if any] in the
appropriate section of the paycheck.

Enter the after-tax contribution using 'Other After-Tax Deduction' and
show as transfer to the 401k account. Have tested this and QW seems to
handle it correctly from a tax reporting standpoint.

Posted by Yuri Shtil on June 16, 2007, 10:49 am

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If you were to take distributions from this accout, how would you allocate
between non-taxable and taxable portion?

>> My new employer offers a 401k with both before-tax and after tax

>> contributions. Has anyone come across this? How would you set up the 401k

>> account in Quicken if contributions are both before-tax and after tax?

> Yes, I took advantage of it back when I was still getting a paycheck.

> I'll assume you are using QW's 'Paycheck' and QW's 401k account.

> Enter your pre-tax contributions and employer match [if any] in the

> appropriate section of the paycheck.

> Enter the after-tax contribution using 'Other After-Tax Deduction' and

> show as transfer to the 401k account. Have tested this and QW seems to

> handle it correctly from a tax reporting standpoint.

Posted by JM on June 16, 2007, 11:25 am

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> If you were to take distributions from this accout, how would you allocate

> between non-taxable and taxable portion?

> >> My new employer offers a 401k with both before-tax and after tax

> >> contributions. Has anyone come across this? How would you set up the 401k

> >> account in Quicken if contributions are both before-tax and after tax?

> > Yes, I took advantage of it back when I was still getting a paycheck.

> > I'll assume you are using QW's 'Paycheck' and QW's 401k account.

> > Enter your pre-tax contributions and employer match [if any] in the

> > appropriate section of the paycheck.

> > Enter the after-tax contribution using 'Other After-Tax Deduction' and

> > show as transfer to the 401k account. Have tested this and QW seems to

> > handle it correctly from a tax reporting standpoint.- Hide quoted text -

> - Show quoted text -

Can not give you a definitive answer but it involves filing IRS Form
8606. This form apparently calculates the taxable/non-taxable portions
of the distributions.

Here is a link to a thread in another forum which briefly discusses
this:

http://tinyurl.com/27638o

You will note that, according to this refence, it is the owners [your]
responsibility to track the after-tax contributions. I did this by
appending a Class, "AT", to the transfer indication in QW - e.g.,
after-tax contributions showed a category "[401k Account]/AT". A
simple Class Report for "AT" itemized these contributions.

Unfortunately, QW does not have the ability to handle a partially
taxable distribution - while keeping the tax reporting function
correct. With this situation, and the advent of the Roth 401k, QW will
hopefully upgrade the 401k account feature.

FWIW, I managed to avoid the distribution issue - not by design. I
rolled the 401k acct over to another tax-deferred vehicle. This was
before recent tax law changes and the FI issued two checks; one for
the exact cumulative total of ny after-tax contributions [non-taxable
distribution] and a second check for everything else [tax-deferred
distribution]. The later was deposited too the new account and my
distributions are 100% taxable as ordinary income.

Posted by 200523 on June 16, 2007, 5:01 pm

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