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WSO
Level 3

401K transfer of After Tax funds to 401K Roth

Does TT have a display bug for 1099-R when a portion of 1099-R funds is transferring to an 401K  in plan Roth?  I have a 1099-R in which a portion of the 401K money  was a direct rollover to an IRA and the after tax portion (block 5 in 1099R) was transferred to an INPLAN roth account in my 401K.  Code in 1099R block 7 is G.  I answer "YES" to TT question is this 1099R reporting a rollover of funds from a 401K to a Roth 401K and it appears TT correctly calculates the tax liability based on the basis.  However when I go back and recheck this form, the "NO" block is checked in this question above even though I previously answered "YES".  Bug?  Did I answer correctly?

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1 Reply
dmertz
Level 15

401K transfer of After Tax funds to 401K Roth

TurboTax is incapable of directly handling a single code G Form 1099-R that reports distributions to multiple destination accounts of differing types.  You must split the Form 1099-R into two, one for the portion rolled over to the traditional IRA and the other for the portion that was the In-plan Roth Rollover (IRR).

 

Note that IRS Notice 2014-54 only allows the box 5 amount to be allocated entirely to the IRR (or any other allocation you choose) if the direct rollover to the traditional IRA and the IRR were requested to be made at the same time.  If these were two separately requested distributions from the traditional 401(k) account (which probably is not the case here), each would generally receive a proportionate share of the box 5 amount.

 

[Edit]  Because the amount in box 2a is zero, you probably will get the same result by indicating that the entire distribution was rolled over to a Roth 401(k) even though only a portion of the gross amount appears in box 5.  The question that TurboTax keeps defaulting to No is one for which TurboTax does not record the answer, so TurboTax simply asks it again.  As long a the correct ($0) taxable amount appears on Form 1040 line 4d, it's being handled correctly.

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