1099-R distribution code G does not seem to handle a 401k rollover to both a Traditional IRA and a Roth IRA properly

[user17702431057]

Using TurboTax 2025 desktop premier version and I am attempting to enter a 401K 1099-R rollover distribution.   Early in 2025, I did a partial 401k rollover to a Roth IRA, around 5% of the total 401K.  Later in 2025, I rolled the remaining 95% of the 401K into a Traditional IRA.   I received a 1099-R with the 100% of full amount of the 401K that was rolled over in 2025 listed in box 1 (gross distribution) and in box 2 (taxable amount)  the value that that was rolled into the Roth IRA.   The distribution code value is "G".    I can enter into the 1099-R form in TurboTax,  but the follow-on questions do not allow me to specify that only part of the distribution amount was rolled into the Roth account. It seems to be all or none on the question.  If I selected that I rolled it into the Roth, it taxes the full 100% of the gross distribution amount.  If I don't select that, it fails to include the 5% that I rolled into the Roth in my taxable income.  It totally ignores the taxable amount.  To me, this looks like TurboTax is not properly handling the fact that part of the distribution is taxable.  

I have considered entering this as 2 separate 1099-R entries even though I only received one from the vendor, but don't know if this will have any impacts that I am not aware of.   

Is this really a problem with TurboTax 2025 that I should wait for a bug fix to correct, or should I use the above approach of trying to split my 1099-R apart into 2 separate TurboTax entries.

Thanks for any insight. 

[DavidD66]

No, it is not a problem with TurboTax.  You should have received two Forms 1099-R - one for the Roth Rollover and one for the Traditional Rollover.  I would enter it as two different transactions - Forms 1099-R.  It shouldn't cause any problems, as the IRS tends to look at things in total.  Worst case scenario, as I see it, is that you get a letter from the IRS to which you would just need to respond to with an explanation and perhaps some documentation.  

[dmertz]

The 401(k) plan was correct to issue only a single Form 1099-R.  It would have been improper had they issued two.

Because TurboTax is incapable of handing a Form 1099-R that reports rollovers made to two destinations, traditional and Roth, you yourself must split the form 1099-R into two to accommodate this deficiency in TurboTax's capabilities.  Splitting a Form 1099-R under these circumstances is a common necessity when using TurboTax.

[tt11374]

I'm having exactly the same issue.  During 2025, I converted part of my 457 account (tax deferred) to a Roth account (taxable), and later, rolled over the remaining 457 balance to an IRA account with a different institution (not taxable).  I've now received a single 1099-R, with a number in line 2a taxable amount reflecting the  457 to Roth conversion, and line 7 code is G.   But, the 2a taxable amount is not showing in 1040 or NY state form. 

I see the issue has been reported here for a number of years, but not addressed by Turbotax yet. 

Could you confirm that as of now, the best/only solution is to split the 1099-R form into two, one for taxable amount, and the other for non-taxable?  

Thank you very much.

[BillM223]

Yes, we normally advise you against changing numbers on forms or changing forms in other ways. However, it is hardly possible to code for all the possible eventualities that you might find in doing taxes - especially since the law changes every year.

That is why we have to occasionally advise you to do workarounds so that the result is tax return that is as accurate as possible. 

dmertz has correctly told you (both) that the way to get TurboTax to do what you want is to create two 1099-R forms, with the one having the 5% distribution in box 1 for the Roth IRA and the second would have the 95% of the distribution to the traditional IRA.

Then, for each 1099-R you can answer the questions in each case to apply to all the money in that particular 1099-R. This should solve your state issues as well.

As David said, the IRS looks at the totality, and besides, if they ever write you a letter wondering about this, you will have already documented what you did and why...you will, won't you? Just write this up for yourself and keep it in your tax files in case anyone ever wonders.

@user17702431057 

@tt11374 

[tt11374]

Thanks for the reply.  As suggested by dmertz and confirmed by you, I will split the 1099-R into two, one for the taxable amount, and the other for the non taxable amount.   Hopefully,  Turbotax will address this issue in the future updates.

Best regard.

[user17702431057]

Thanks to all for the replies.   I will reluctantly do the workaround rather than getting an appropriate fix from TurboTax.   While I fully understand that it's impossible for TurboTax to code for all tax possibilities,  I did a little more digging into this problem and found references back to at least 2020 where users have reported this problem on this forum.   If every year people are reporting this problem, and perhaps only those astute enough to notice this incorrectly calculated tax issue,  then TurboTax development should take notice and prioritize correcting this problem.    I find it hard to believe that this is a rare tax occurrence.  I suspect there are  a number of people each year that actually do a split rollover of something like a tax deferred 401K into both a Roth IRA and a traditional IRA.    Given that this problem is reported  over and over again each year as a community topic, that should be enough to highlight that it's a very common issue.  Worse yet, this problem can easily cause an  incorrect tax to be calculated and reported for a TurboTax user not paying close attention to what is occurring under the covers in TurboTax.  Given that, I respectfully encourage the TurboTax development team to escalate addressing this known problem.  

[dmertz]

Because there is no tax withholding on a code-G Form 1099-R, the details of the 1099-R forms that you entered into TurboTax are not included in your filed tax return.  The only the result on Form 1040 lines 5a and 5b will be present.

TurboTax used to allow doing this with a single entry, but that presented problems for the case where the traditional 401(k) account had after-tax basis and the rollovers to the traditional IRA and to the Roth IRA were not the result of a single distribution request made to the 401(k) plan.  In that case TurboTax had no way to determine how much of the after-tax basis to allocate to each of these rollovers without more input from the user.  By requiring the user to split the form into two, it forces the user to properly allocate the after-tax basis.  This problem is not present if there is no after-tax basis, but implementing two different ways to report a split distribution depending on the circumstances would likely be more confusing than helpful.

Things would get even more complicated if the code-G Form 1099-R included the reporting of an In-plan Roth Rollover.  Although I don't recall anyone ever posting about such a situation, it's possible to have a single code-G Form 1099-R that reports the sum of an In-plan Roth Rollover, a rollover to a Roth IRA and a rollover to a traditional IRA, requiring the form to be split three ways.

[user17702431057]

Thanks for the follow-up on why it's more complicated to handle scenarios where the after-tax was included in the 401k balance.   I understand that it may then difficult to craft an elegant solution to the problem.

My concern remains that there isn't any warning when I enter the form that it won't be correctly handled by TurboTax nor any hint on what actions I might need to to resolve the problem.   TurboTax knows that I entered a form with the both the box 1 (gross) and box 2 (taxable) having values, along with the distribution code G.  I was able to realize the issue with the tax calculation as I stepped thru the questions after entering the 1099-R, as I was seeing how the tax due  calculation was changing (or not changing)  depending on how I answered it.  It either taxed the whole amount or none of it. The gotcha was no answer would allow it to correctly calculate the tax without splitting the form, as you've already pointed out.    Now, I caught it because the values were significant enough for me to notice, but I don't know if every user of TurboTax would see and understand the implications. 

Shouldn't TurboTax at least present a warning or some other notification that it can't correctly handle the form as entered, without it blindly accepting it without any warning?  Perhaps with a pointer to what must be done to split the form apart.   What happens now is the user must be astute enough to recognize there is a problem and then go searching the community site hoping there is an answer available.

I will grant you that I did not get all the way to running the final tax checks  and maybe it would have warned that it was incorrect at that time.  However, I believe it is normally better to warn a user during the entry of a form if there is a problem rather than waiting until the end (or maybe not at all, as I didn't test to see if it would ever catch the mistake).

Thanks again for all your input.