1099 R issues

[tacy]

Husband changed employer. Rolled profit sharing 401k into a Traditional IRA. Got a 1099 R for a total distribution, got a second 1099R for repayment of a small loan we took against it several years ago.  We took a distribution when we rolled it over, the other investment firm gave us a 1099R for the distribution.  We did not pay the taxes that we knew we would have to pay on part of it.  When I put all 3 1099R forms into Turbo Tax it adds them together as if our fund was larger that it is.  The total rollover was $196,000, loan repay was $2,700, distribution was $40,300.  Turbo tax shows the total as all 3 together and it appears we are paying tax on all as it jumped to owing $14,000 even though parts of our distribution are non-taxable (education and health care). What is the fix to this?  

[dmertz]

The jump in tax liability seems reasonable.  Check Form 1040 lines 4b and 5b to see how much is being included in taxable income.

Using the money for education and heath care does not except these portions from income tax, only potentially from an early-distribution penalty.  It's likely that some of your distributions are subject to this penalty determined on Form 5329 Part I. 

[tacy]

Thank you for that info.  I think my confusion comes from the total amount turbo tax is showing for the one retirement fund we have. We have a 5498 that gives the correct $155,000+ , but turbo tax shows $223,000+ because it added all distributions together. Does that total not matter? I appreciate the help. 

[dmertz]

TurboTax shows you both taxable and nontaxable income.  The rollover was nontaxable income that was required to be reported but otherwise does not affect your tax return.  $239,000 would be the correct total of separate distributions of $196,000, $2,700 and $40,300.  I would expect the taxable amount shown to be $2,700 + $40300 = $43,000 if you rolled over neither of these two.