1099 ROLLOVER AND DISTRIBUTION

[KABG140304]

My husband's company sold and let go most all employees, so my husband did a direct rollover of 401k to IRA and then withdrew $20,000. In turbo tax, it is adding his rollover and distribution together to give inaccurate total withdrawal amount. How can I correct this

[MinhT1]

The direct rollover and the withdrawal should be reported on separate forms 1099-R. Only the withdrawal is taxable.

The direct rollover is not taxable. This is how you enter the 1099-R for the rollover.

Enter your form 1099-R by following these steps:

1. In TurboTax, open your tax return
2. Click on Federal in the left-hand column, then on Wages & Income on top of the screen
3. Scroll down to All Income, locate the section Retirement Plans and Social Security and click on Show more
4. Click Start next to IRAs, 401(k), Pension Plan Withdrawals (1099-R).

After entering your form 1099-R, click Continue until you reach the screen Tell us if you moved the money through a rollover or conversion. Check the radio button which corresponds to your situation then click Continue and follow the interview. The rollover amount will be excluded from taxation.

[KABG140304]

Thank you. I did all of that. I am concerned with our total income for the year 2020 appearing to be $20,000 more than it actually was because they counted the rollover and distribution separately instead of distribution coming out of rollover amount

[dmertz]

These are both "income" in the sense that both distributions must be reflected on your tax return, but the amount rolled over will not add to taxable income.  The code G Form 1099-R for the direct rollover that has $0 in box 2a will have the gross amount be present on Form 1040 line 5a but will be absent from the taxable amount on line 5b.  The word ROLLOVER will appear next to the line.

TurboTax's summary combines taxable and nontaxable income to indicate the total of the gross amounts reflected on your tax return.