dmertz
Level 15

Retirement tax questions

First, your 401(k) consists of two accounts:  a traditional 401(k) account and a designated Roth 401(k) account.  The distribution from the designated Roth 401(k) account is only permitted to have been rolled over to the Roth IRA, so that rollover apparently was done correctly.  What I believe that you are saying is that you also rolled the distribution from the traditional 401(k) account over to the Roth IRA.  If so, this rollover is irrevocable and is taxable, despite the code-G Form 1099-R for the distribution from the traditional 401(k) account likely showing that $0 is taxable.  The Tax Cuts and Jobs Act of 2018 eliminated the option to recharacterize the rollover back to a traditional IRA, so there is no option but to include the amount in your taxable income and pay the tax.

 

In the long run you'll probably benefit from having done this rather small taxable rollover to the Roth IRA since future growth will eventually be tax-free once you have met the requirements for qualified Roth IRA distributions.