401K rollover to traditional IRA

[jem15319]

Retired last year. Did a 401K (Empower) to IRA (Fidelity) rollover. Received 1099-R with the following box entries:1 Gross Distribution $X, 2a Taxable Amount $0.00, 2b Total Distribution Checked, 7 Distribution Code G, and 15 State/Payer's state no. MD/00869377.

TurboTax Premier begins discussion at Your 1099-R Entries/Add Another 1099-R button. I'll type it in (Empower is not on the list to download)/Continue

Select Form 1099-R/Continue/Enter information as described on 1099-R and if the box is blank then the entry is blank in TurboTax/Continue/IRA SEP Simple box 7 and 8 checked/No, box is blank/Continue

Verify Box 2a and 2b/Box 2a Taxable Amount $0.00 Box 2b is blank/Continue

Rollover 401(k) to Roth 401(k)/ No/Continue/Was Money Rolled Over to Roth IRA/No/Continue

Employed as Public Safety Officer/No/Continue

Where Distribution From/No and shows box 15 info/Continue/Withdrawl Due to Disaster/No/Continue

Your 1099-R  Entries/Gross Dist Box1 total included as Total Withdrawl/Continue

Did you take prior disaster distribution/No/Continue

Any Nondeductible Contribution to IRA/No/Continue

Select Done with Income/Recheck Box 1 and 2a are correct/Do you want to change/No/Continue

Again asks if disaster distribution 2018-21/No/Continue

Shows Picture of Income/Amount of Rollover shows up in Pensions - NonTaxable

Now my taxable income is a ridiculous number. Interesting that the Federal Refund amount at the top did not change. Will this ridiculous number be calculated into my AGI? (Consequences for Medicare payment)

[DianeW777 · Accepted solution]

No, the distribution rollover will not be part of your adjusted gross income (AGI). The IRA rollover is not taxable and the code G, in Box 7 is the indicator of a trustee to trustee transfer as you explained.  When I test your scenario and I check the 1040, (Line 5 for 401(k) distributions) none of the amount from the 1099-R with code G is taxable. 

• You can enter the full amount as the taxable amount and the code G will still be the deciding factor for taxability.  It should not be taxable on your tax return.

Using the Tax Tools to 'Preview My 1040':

• To find Tools: 
  • Sign into your TurboTax account and open or continue your return. 
  • Select Tax Tools in the left menu. 
  • You'll find Tools beneath Tax Tools.
  • Select View Tax Summary
  • Select Preview My 1040 (left black panel)

[dmertz]

If adding this code-G Form 1099-R with a zero amount in box 2a changed your taxable income, delete the form from TurboTax and enter it again.

[jem15319]

Yes, it worked out okay because the 1040 form did not include the rollover in the taxable income.

Even though the subsequent screen showing Income comparison for 2021 and 2022 also showed "Total Income" including the rollover, within the list of income categories the rollover amount was captured under the category "Pensions - nontaxable". It became apparent that the "Total Income" included taxable and nontaxable categories.

From a user perspective, it may have been clearer if they depicted the list as two groups taxable or nontaxable. Alternatively, they could add a label to Total Income so it read "Total Income (Taxable and Nontaxable)".