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Federal Withholding on an In-Plan Roth Conversion

Compliance Rules Guidelines Regulations Laws

“How do the federal withholding rules apply to an in-plan Roth conversion in a 401(k) plan?”

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Highlights of Discussion

Conclusion

Because plan sponsors do not apply federal income tax withholding to a direct in-plan Roth conversion, a plan participant may need to increase his or her withholding or make estimated tax payments to avoid an underpayment penalty from the IRS.