1099-R box 2a not appearing on 1040 line 5b

[mfenske17363]

I have a 1099-R that has amounts in box 1, and 2a.  The distribution code is 7 and IRA/SEP/SIMPLE is blank.  According to my financial advisor, the taxable amount from 2a should be reflected on form 1040 on line 5b and it is not.  It is flagged as a rollover (which it is) but 5b shows 0.

[DoninGA]

A Rollover would not be taxed so the amount on Line 5b should be 0.

[mfenske17363]

This was result of an NUA distribution (rollover) and not a standard distribution which seems to be the difference but not sure how to indicate that in TT. 

[DoninGA]

@mfenske17363 If one of the TurboTax Tax experts on this forum do not reply back, then you need to contact a tax expert - See this - https://ttlc.intuit.com/turbotax-support/en-us/help-article/product-setup/connect-tax-expert-turbota...

Or maybe our forum expert on 1099-R distributions is available - @dmertz 

[dmertz]

If NUA shares are rolled over to another qualified retirement account such as an IRA, they no longer qualify as NUA shares.  To qualify as NUA shares, they must be deposited into a nonqualified account such as a taxable brokerage account.  A deposit into a nonqualified account (a taxable brokerage account) is not a rollover.

If your Form 1099-R includes both NUA shares that were not rolled over and other funds that were rolled over, you must split the form into two to accommodate TurboTax, one for the NUA shares and another for the portion that was rolled over.

[mfenske17363]

Thanks everyone for the responses, now for a quick (?) hypothetical scenario:

Original 1099-R looks like:

   Box 1 = 10000

   Box 2a = 4000

   Box 2b = Total Distribution is checked

   Box 6 = 6000

   Box 7 = 7

----------------------------------

I need to show Box 2a amount on line 5b of 1040 so break up the original 1099-R into 2 as below

1099-R (1)  (This should be the NUA amount which is taxable)

   Box 1 = 4000

   Box 2a = 4000

   Box 2b = Total Distribution is checked

   Box 6 = 0

   Box 7 = 7

Finalized with the following answers

   IRA/SEP/SIMPLE is checked?

      No, the box is blank

   What kind of retirement plan do you have with Acme Incorporated?

      Qualified plan (most common) is checked

   Do any of these situations apply to you?

      None of these apply is checked

   Tell us if you moved the money through a rollover or conversion

      I rolled over some or all of it to an IRA or other retirement account within the limits... is checked

   Did you roll over all of this $4000 (Box 1) to another retirement account?

      I did something else is checked

   Annuity information - Periodic payments

      No is checked

   Do you want to use the special averaging method...

      No is checked

----------------------------------------------------

1099-R (2)  (This should be for the remainder)

   Box 1 = 6000

   Box 2a = 0

   Box 2b = Total Distribution is checked

   Box 6 = 6000

   Box 7 = 7

Finalized with the following answers

   IRA/SEP/SIMPLE is checked?

      No, the box is blank

   What kind of retirement plan do you have with Acme Incorporated?

      Qualified plan (most common) is checked

   Do any of these situations apply to you?

      None of these apply is checked

   Tell us if you moved the money through a rollover or conversion

      I rolled over some or all of it to an IRA or other retirement account within the limits... is checked

   Did you roll over all of this $6000 (Box 1) to another retirement account?

      Yes, I rolled over $6000 to an IRA or other retirement account... is checked

Sorry for the lengthy reply but trying to get confirmation that I am doing the right thing here.

Thanks again!

[dmertz]

No, I don't think that that can be right.

I'm still at a loss to understand what was rolled over if what was rolled over wasn't any of the employer shares.

 Can you elaborate on the value of the employer shares were distributed and deposited into a nonqualified brokerage account, along with their cost basis, and the value of whatever else was rolled over to a qualified retirement account like an IRA?  You can use hypothetical values.  I'm still trying to understand what transactions actually took place.  Were all of the employer shares put into a qualified retirement account rather than a nonqualified brokerage account?

Since you haven't mentioned any amount box 4 or box 5, II assume that there is nothing in those boxed of the original Form 1099-R.

It seems like the hypothetical original Form 1099-R is be reporting only the distribution of the employer shares unless there is a tiny amount of something else that was distributed in-kind because I would expect the amount in box 2a to be the sum of the cost basis of the employer shares plus the value of whatever else was distributed.  Is there another Form 1099-R, perhaps with code G, that reports whatever was rolled over to another qualified retirement account like an IRA?  (Or, when you said that something was rolled over, were you misusing the term "rollover" and there was, in fact, nothing rolled over to a qualified retirement account?)

[mfenske17363]

So, this was the last part of holdings I had in a 401K after I retired.  Those sums represented stocks that were part of the 401K employer contribution in corporate stocks and had not been taxed and is classified as Net Unrealized Appreciation (NUA).  The cost basis in my example would be the $4000 portion in Box 2a and should be taxed as it was moved from the 401K to the IRA.

I had received other stock awards over the years, but they went into a separate stock fund and were taxed as they were awarded.  

The cost basis as part of this 1099-R need to be taxed as part of earnings (lower rate) as opposed to later as capital gains.  There are no other 1099s from the employer or employer programs.

The above is my understanding with discussions with my financial advisor.

Thanks!

[DavidD66]

When you took your lump-sum distribution, If, as you said earlier, the only assets remaining in your 401(k) were shares of company stock then you should have only received one Form 1099-R, and you only need one 1099-R.  Using your example above for a $10,000 distribution of company stock with a cost basis of $4,000, your original 1099-R was correct and should be entered that way.  You should NOT indicate that you rolled any of the funds over.  If the lump-sum distribution was done properly it was all distributed to a non-qualified brokerage account, not an IRA or other retirement plan - this is not a rollover.  The $4,000 in box 2a should show up on your tax return as taxable income.  The $6,000 is your cost basis in the shares distributed.  This amount does not flow to your tax return.  Your broker should use it as the cost basis for your distributed stock. 

[mfenske17363]

There was a small amount in the 401K that was not part of NUA investments.  I did receive a separate 1099-R for that amount which was rolled over to the IRA.  I did not include that in discussions above as I didn't think it would impact the 1099-R for the NUA investment.

[mfenske17363]

OK, I think I understand.  The funds were distributed into a non-qualified brokerage account (not an IRA). 

To be clear, when asked "Did you rollover all of this ... (Box 1) to another retirement account?" I should select "I did something else".

This way, the taxable amount gets carried forward to the 1040 and I can proceed on.

Did I get that right?

Thanks!