Last year I switched jobs and did a rollover of my 401k with Fidelity, from the previous job to the new job with. When I received my 1099-R from Fidelity, the Total Distribution box was checked in Box 2b.
Last year, I also maxed out my Roth IRA account. Because of the 401k Total Distribution, it push up my 2019 year earnings significantly, to the point I exceeded the contribution limit for my Roth IRA. Now I have to remove the excess contributions and earnings and do a re-characterization from a Roth IRA, to a Traditional IRA, and then move that money into an SEP IRA, because I have single person LLC business.
My question is, if I rolled over the old 401k funds to my new plan, (which I did immediately), why is it considered income / earnings? I didn't use the money or dip into it, all I did was roll it over? Is there any way to avoid this?
