1099 R for 401k after-tax rollover to Roth

[heybrian1]

I rolled over after-tax 401K monies into my Roth IRA after I retired. The 1099 R I received for this has Box 1 (gross distribution) filled in with the actual dollar amount I rolled-over. Then Box 2a (Taxable amount) as zero dollars ($0.00) Also, (Box 7 as "G" code and IRA/SEP/SIMPLE box "checked". This should not be a taxable event per IRS rules yet Turbotax tells me the 1099R is in error with the "G" code and/or IRS/SEP/SIMPLE box checked. My question is this: How should this 1099R be corrected to reflect a non-taxable event such as mine?

[jtax]

Bottom line you may need to get the 1099r reissued or you may have a subtle TT bug. I'd start by calling your 401k provider and asking why the IRA/Simple box was checked for a 401k. (see below).

Was the 401k a designated Roth 401k or a traditional 401k?

Do you know if the 401k was a "deemed IRA" (see page 3 of the instructions below)?

Is this the error you get? (This is from the desktop TT not the online)

You might try looking at Page 4 of the 1099r instructions ("Direct Rollover").

https://www.irs.gov/pub/irs-prior/i1099r--2021.pdf

It is also possible that you could get away with unchecking the "IRA/Simple box" and seeing if that works. While there is a danger that something won't be calculated perfectly in that case, if this was a direct rollover, and doing so causes TT to treat it properly (i.e. not as a taxable distribution), you might be ok. I can't guarantee though.

[jtax]

Actually now I see you said it was after-tax. I think that might complicate things. It is a conversion that happens to not be taxable? Not sure what you should do other than start with the 401k custodian.

[dmertz]

If the IRA/SEP/SIMPLE box is marked on a code-G Form 1099-R, the form is reporting a direct rollover from a traditional IRA to the traditional account in an employer plan like a 401(k), not the other way around.  If the rollover was indeed from a traditional account in a 401(k) to a Roth IRA and the 401(k) plan marked the IRA/SEP/SIMPLE box, contact the 401(k) plan to have them correct the form by unmarking the IRA/SEP/SIMPLE box.  A 401(k) plan is never permitted to mark the IRA/SEP/SIMPLE box.

For a direct rollover from the traditional account in a 401(k) to a Roth IRA, the after-tax amount should be present in box 5 of the Form 1099-R provided by the payer.

[heybrian1]

I contacted my 401K administrator and created a ticket. Now I wait. 

[heybrian1]

They did indeed check the IRA,SEP/Simple box. Hmm not allowed to do so you say. Is this rule in the IRS playbook for me to read? I lack confidence in their ability/willingness to fix this for me. Thx.

[dmertz]

The IRA/SEP/SIMPLE box is only to be used for distributions from IRAs.  A 401(k) is not an IRA. (SEP-IRAs and SIMPLE IRAs are types of traditional IRAs.)

See the instructions for Form 1099-R:  https://www.irs.gov/pub/irs-pdf/i1099r_21.pdf

Only an inexperienced plan administrator would make such a mistake.

[heybrian1]

My 401K administrator is telling me that they are not in error and that the IRA/SEP box should be checked. Now what? 

[DaveF1006]

No. Actually Code G is an incorrect distribution code. In order for this not to be taxable assuming your 401K is a Roth 401K, then it should be a Code H-Direct Rollover of a designated Roth account distribution to a Roth IRA. The checkbox is correctly marked. Since you mentioned that the 401K was funded with after-tax dollars, then it is designated Roth 401K thus the rollover should not be taxable.

Ask the trustee that administers your 401K to issue a corrected 1099R listing H as the correct distribution code or else that full amount reported will be taxable.  This is because with a Code G, is is reported as pretax dollars being converted to a Roth and this is a taxable event.

[heybrian1]

This was NOT Roth 401k money this was After-tax 401k money. I believe code G is correct. But either the IRA/SEP/Simple box needs be be  blank or the box 2b should be "taxable amount not determined. unfortunately my 401k people are idiots. Who can I turn to when I cannot convince my administrator that they indeed are in error

[JohnB5677]

I posted a 1099-R in TurboTax Premier with the guidelines you described.  I did get an error message that a code "G" should not have the IRA box checked, (I agree with that).  However, I ignored that and went on:

1. Did you move the money to a Roth IRA? = Yes
2. Double check Box 7 and the IRA box on your 1099-R = This is correct
3. Did you make after-tax contributions to a 401(k) or 403(b) plan? = Yes, and the amount

I continued to the end and the return was posted correctly, and there was not an error in the Federal Review.

You can check the posting of the 1040.

1. On the menu bar on the left that shows.

   1. My Info

   2. Federal

   3. State

   4. Review

   5. File

2. Select Tax Tools

3. On the drop-down select Tools

4. On the popup menu

5. Select View Tax Summary

6. On the left sidebar

7. Select Preview my 1040

8. See line 4a & 4b

[heybrian1]

I am using the desktop version of premiere, and this is what I see. Then when I click continue to go back and review my 1099-R TT deselects the box that I checked "this money was rolled over to a Roth ira account"

It's a perpetual loop. Feels like Ground Hog day the movie. 

[heybrian1]

I think it would be a bad idea for me to deselect the IRA/SEP/SIMPLE box on my own in TT as it would not match the 1099-R my 401k administrator sent to the IRS. Yet deselecting the box is the only way forward with the TT software. There must be a work around in "forms" right?

[VolvoGirl]

Did you ask them why the IRA box is checked?  Did you only get 1 1099R?   Maybe it first went into a Traditional IRA then to the ROTH IRA?

[heybrian1]

I did reach out to my 401k administrator. I received two 1099s. One for the pre tax amount the other for the after tax contribution. They refuse to amend the 1099-R thus far. I presume that the earnings on the after-tax is included in the pretax amount and as such will be taxable when I withdraw.