Why does TurboTax treat my 401(k) rollover as taxable unless I check the IRA/SEP/SIMPLE box?

I received two 1099-Rs from Vanguard for rollovers from two different 401(k) accounts. Both were direct rollovers, and none of the funds were distributed to me.

 

  • The first 1099-R was for a rollover split between a traditional IRA and a Roth IRA.

  • The second 1099-R was for a full rollover into a traditional IRA.

 

 

In both forms, the IRA/SEP/SIMPLE box is not checked, which is consistent with IRS instructions — that box should only be checked when the distribution is from an IRA, not a 401(k).

 

Here’s where TurboTax behaves oddly:

 

If I leave the IRA/SEP/SIMPLE box unchecked (as it appears on the form), TurboTax treats the entire amount as taxable, significantly increasing my tax owed.

 

But if I check the IRA/SEP/SIMPLE box, TurboTax:

 

  • Reduces the tax liability to zero,

  • Moves the amount to Line 4a (IRA distributions) with $0 in 4b, and

  • Labels it as a ROLLOVER.

 

 

It also gives me a warning:

 

“If this is a Roth conversion with code G, it should have code 1, 2, or 7 instead.”

 

Later, it asks me to uncheck the ‘Full Roth conversion’ checkbox — which I did — and then it lets me proceed with zero tax due.

 

So I’m confused:

 

  • TurboTax only gets the tax treatment right when I check a box that isn’t actually marked on the 1099-R.

  • I don’t want to override the form in a way that conflicts with what the IRS received.

  • The second 1099-R (which was a full rollover to a traditional IRA) did not cause this issue, so the problem seems limited to the case where part of the rollover went to a Roth IRA.

 

 

Has anyone else run into this? Is this a known TurboTax bug or is there a proper workaround?