As others have responded here, I resolved this by filing two substitute 1099-Rs using form 4852. Since I did all of this more than a year ago, I don’t recall the exact flow for doing this in TurboTax 2021, but it was fully supported by the program. My return was accepted via electronic filing and I haven’t heard anything from the IRS.
Here’s some more detail on exactly what I did. There are 3 numbers to keep in mind:
$XXXX.XX = The total distribution from your traditional IRA.
$YYYY.YY = The nondeductible basis that was included in $XXXX.XX. Fidelity rolled this part into a ROTH IRA.
$ZZZZ.ZZ = The remainder which is subject to tax upon withdrawal. This is the portion that I rolled into my employer’s traditional 401k plan ($XXXX.XX - $YYYY.YY).
The first corrected 1099-R has a gross distribution of $ZZZZ.ZZ, 0 for the taxable amount, and uses distribution code G. You also have to explain how this value was determined (form 4852 line 9) and the efforts you took to get the 1099-R corrected (form 4852 line 10).
For line 9, I said:
The $ZZZZ.ZZ reported on this 1099-R is the taxable portion of a total distribution from a traditional IRA to an employer sponsored 401k. Upon receiving the funds, the target institution notified me that they could not accept the nondecutable contribution portion of the IRA distribution into the employer sponsored 401k. They instead split out the $YYYY.YY basis into a separate ROTH IRA. The value reported here is therefore $YYYY.YY less than what was the original value reported by Charles Schwab ($XXXX.XX).
For line 10, I said:
I contacted both Charles Schwab and Fidelity (the target of the rollover) but both indicated that it was the other institution's responsibility to issue a correction. This left me no other option but to submit substitute 1099-R forms.
The second 1099 has a gross distribution of $YYYY.YY, leaves taxable amount blank, has “Taxable amount not determined” checked, and uses distribution code 2. I also checked “Total distribution” as this was the final distribution from the account. I was following the guidance for ROTH conversions in the instructions for form 1099-R.
For line 9, I said:
The $YYYY.YY reported on this 1099-R is the nondeductable contribution portion of a total distribution from a traditional IRA to an employer sponsored 401k. Upon receiving the funds, the target institution notified me that they could not accept the nondecutable contribution portion of the IRA distribution into the employer sponsored 401k. They instead split out the $YYYY.YY basis into a separate ROTH IRA. The value reported here is therefore the $YYYY.YY delta between what I reported on the code G substitute 1099-R ($ZZZZ.ZZ) included in this return, and the original value reported by Charles Schwab ($XXXX.XX).
I used the same text for line 10 as in the first 1099-R.
Hope that helps.
