1099-R code 4 and code 4G

[kellyfur]

After my husband's death in 9-2023 I rolled over his 401K into my own with Empower.  I took the 2023 RMD from the combined account.  Empower sent me an additional small check saying that not all of his investments were compatible with my account and that the check amount was for an investment that could not be rolled over.  Now I have received 3 1099-Rs - one for my combined account withdrawal, one for the investment that could not be rolled over (distribution code 4) and one for the remainder of my husband's account that I rolled over (distribution code 4G). 

My question:  will I have to pay tax on my husband's rolled over account, distribution code 4G?    

[dmertz]

"I took the 2023 RMD from the combined account."

Whose RMD?  If it was your husband's RMD, that was required to be distributed to you before rolling over the remainder and the RMD was ineligible for rollover, and your husband's 401(k) plan was responsible for enforcing that.  Rolling over the RMD creates an excess contribution that is more complicated to correct than just taking a regular distribution.

The code 4G Form 1099-R is reportable and should show a $0 taxable amount.  However, the form is incorrect if the amount in box 1 includes an RMD that was ineligible for rollover.

What is the code in box 7 of the Form 1099-R that reports the distribution that you requested from the combined account?  Is the IRA/SEP/SIMPLE box marked?

[kellyfur]

Thank you.  Both of us were required to take RMDs.  I believe code 4G is not taxable.  The next line shows 0 taxable.  Do you agree?

[dmertz · Accepted solution]

Your husband's 2023 RMD was required by law to be paid out of the 401(k) before (or coincident with) the remainder was rolled over to your account.  If your husband's plan failed to do that, the code 4G Form 1099-R is incorrect in that it includes an amount ineligible for rollover and your account contains an excess contribution.  Correct handling would have resulted in two Forms 1099-R from your husband's plan, one reporting the distribution of the 2023 RMD (code 7 if paid to your husband before his death, code 4 if paid to you as beneficiary) and the Form 1099-R with code 4G for only the portion eligible for rollover.