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If the employee made after-tax contributions to the non-Roth 401(k) account, these amounts are commingled with the pre-tax funds and simply add to the non-Roth 401(k) basis.When distributions are made the taxable portion of the distribution will be calculated as the ratio of the non-Roth contributions to the total 401(k) basis.The ability to defer income taxes to a period where one's tax rates may be lower is a potential benefit of the 401(k) plan.

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The remainder of the distribution is tax-free and not included in gross income for the year.

For accumulated after-tax contributions and earnings in a designated Roth account (Roth 401(k)), "qualified distributions" can be made tax-free.

The client for whom he was working at the time chose not to create a 401(k) plan.

Income taxes on pre-tax contributions and investment earnings in the form of interest and dividends are tax deferred.

Unlike the Roth IRA, there is no upper income limit capping eligibility for Roth 401(k) contributions.

Individuals who find themselves disqualified from a Roth IRA may contribute to their Roth 401(k).

The employee ultimately pays taxes on the money as he or she withdraws the funds, generally during retirement.

The character of any gains (including tax-favored capital gains) is transformed into "ordinary income" at the time the money is withdrawn.

Beginning in the 2006 tax year, employees have been allowed to designate contributions as a Roth 401(k) deferral.

Similar to the provisions of a Roth IRA, these contributions are made on an after-tax basis.

For example, a worker who otherwise earns ,000 in a particular year and defers ,000 into a 401(k) account that year only reports ,000 in income on that year's tax return.

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