401K to 401K Roth conversion

Forum|Forum|5 years ago
February 11, 2021
2 replies
3 views

I converted my 401K to a 401K Roth in 2020. I entered the 1099-R with the code G that I received from my financial institution into Turbo tax.

In 2020 I also contributed to a Roth IRA. Turbo tax is indicating that I am not eligible to contribute to a Roth IRA and is including the taxable portion of the 401K to 401K Roth conversion in the MAGI calculation for Roth contribution eligibility.

I know that Traditional IRA to Roth IRA conversions do not impact your eligibility to contribute to a Roth IRA and that you fill out Form 8606 to document that calculation.

Are inplan 401K to 401K Roth conversions supposed to impact your eligibility to contribute to a Roth IRA?

TurboTax Premier Online

AmyC

Level 15

No. As long as you are income eligible, a rollover should not affect your contribution. You stated code G, not H. Code G specifically states not to use Code G for a direct rollover from a designated Roth to a Roth. See page 16 of 1099-R instructions. I suggest you get a corrected form with code H, if that is accurate. Otherwise, perhaps something else is going on?

See Roth IRA contributions for more information.

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statz1964

Level 2

I know this thread is a year old, but having the same issue on my 2021 tax return. The reply, however, appears to have mis-understood the situation. The 1099R was documenting the in-plan conversion from a Traditional 401k to a Roth 401k. It wasn't documenting a Designated Roth [401k] to a Roth IRA as the reply appeared to reflect.

I've also found that within Turbo Tax, you can keep the Distribution Code of G, and have the conversion not impact MAGI or ability to contribute to Roth IRA, if you answer the question following this entry as "No, this money didn't roll over to a designated Roth 401k or 403b account." Instead, show the money having gone rolled over to a Roth IRA. That wouldn't appear to be the correct answer, but it correctly reflects the taxes IF an in-plan conversion from a Traditional 401k to a Roth 401k doesn't affect the modified adjusted gross income (MAGI) (which would make sense since converting Traditional IRAs to Roth IRAs doesn't affect MAGI). The question remains:

"Do in-plan conversions from a Traditional tax-deferred 401k to a Roth 401k affect your MAGI?" (It's already firmly established that conversions of Traditional IRA to Roth IRAs do not affect MAGI.)

MarilynG

Level 15

Yes, a rollover from the traditional 401(k) to the Roth 401(k) would be taxable and affect MAGI. Is there an amount in Box 2 or is the Taxable amount not determined checked in Box 2b?

An in plan Traditional 401(k) to 401(k) Roth rollover *is* a conversion.

A conversion to a Roth has an impact on your taxes. Typically, most or all of the amount would be taxable. A conversion of a Traditional IRA to a Roth IRA does affect MAGI.

Click this link for discussion on 401K to Roth 401K

Here's detail on Conversion you may find helpful.

This article on Calculating AGI/MAGI is also useful.

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Suka1

Level 2

I converted my 401K to a 401K Roth in 2020. The 1099-R came with the code G but the taxable amount as "0".

TurboxTax asked me couple of times to verify this value. Is this correct?

dmertz

Level 15

Rollovers from a traditional 401(k) account to a designated Roth account in a 401(k) are required to be done in-plan, so it seems highly suspect that the 401(k) plan would report a zero taxable amount unless the full gross amount was after-tax and shown in box 5 of the Form 1099-R. Was this rollover done in-plan or was it an impermissible rollover from a traditional 401(k) account in one plan to a designated Roth account in a different plan or did the 401(k) plan simply botch the Form 1099-R?