In 2020, I moved some of my old 401K funds to a ROTH IRA account and in the process, I requested my 401K custodian to withhold 15% of the converted amount as taxes, which they did. For example, let's say, I withdrew a total of $11,764.71 of which $10,000 went to my ROTH IRA and $1,764.71 was used to pay taxes.
Now, I have received 2 separate 1099-R forms from the custodian, one showing the conversion amount (say $10,000) in boxes 1 and 2a along with Code G in box 7 and the other showing the amount of withheld taxes (say $1,764.71) in boxes 1, 2a and 4 along with Code 1 in box 7. In both cases, IRA/SEP/SIMPLE is unchecked.
Upon entering the 1099-R form for the amount of withheld taxes ($1,764.71) into Turbotax Premier 2020, my refund reduces by 10% of the withheld taxes or in the amount of, say $176 as Turbo Tax treats the taxes as money withdrawn but not necessarily as withheld taxes for the conversion amount. My understanding is that the I pay taxes for the whole withdrawal amount (say $11,764.71) based on the rate for my income bracket but no penalty as I am not pulling this money out early for other purposes.
What am I missing here?
