After tax 401k withdrawal to Roth and traditional IRA

[taxed848]

I contribute after tax dollars to my 401k.  I did an in-service direct rollover withdrawal from my 401k that took only the aftertax amount and any associated earnings out. The after tax principal went to my Roth IRA and the associated earnings to my traditional IRA.  Despite the fact that 1099-R Box 2a says $0.00 for taxable amount, Turbotax is counting the difference between box 1 and box 5 (the earnings amount that went into the traditional IRA) as taxable.  How do I get turbotax to recognize this is not a taxable event?

[macuser_22 · Accepted solution]

Assuming a box 7 code G for a direct rollover:

TurboTax does not directly support a single 1099-R going to two different destinations.

What you must do is split the 1099-R into two 1099-Rs.

For the amount rolled to the Traditional IRA.

1) In box 1 use the original 1099-R box 1 minus the box 5 amount.

2) Box 2a = 0.

3) Box 5 = blank.

4) Box 7 = G.

5) Answer NO to the two interview questions that ask about a Roth - the default is a Traditional IRA.

For the amount rolled to the Roth IRA.

1) In box 1 enter the original box 5 amount.

2) Box 2a - 0.

3) Box 5 = original box 5 amount.

4) Box 7 = G.

5) Answer NO to the first interview question about a 401(k) Roth and YES to the rollover to a Roth IRA.

That should properly report the 1099-R. The box totals of the two 1099-R should equal the amounts on the original 1099-R.

Nothing about splitting into two 1099-R's go on a tax return - the IRS only gets the dollar amounts on the 1040 form.

[jlaufer1]

I’m assuming you’ve entered all the fields correctly and answered all the questions right. I had an similar issue where a rollover was being double taxed.  What I found happening is even when boxes on my form had  a “0.00” in TurboTax, the program was reading the 0’s weird. I’d suggest going back and editing the form and wherever you have a “0” delete it and leave the box empty. If TurboTax requires a “0” in the box, they’ll ask for it again. Give that a shot. It worked for me. Hopefully it works for you. 

[macuser_22]

@jlaufer1 - The question implies that the distribution was split between a Traditional and Roth IRA.   That cannot be entered into TurboTax with a single 1099-R.

[krissaun]

Thank you very much for this information . We were struggling with this because we only got the one 1099-R. We split it you said to do in this post and it worked perfectly. Thanks!

[Another Dave B]

Thanks. I just hit the same issue so I can confirm it's still a problem as of 2/19/2022 (TurboTax Premiere Desktop edition). The UI has changed since the original answer was posted and there were a few more questions to say 'no' to, but otherwise the solution worked as is for me.

I'm not sure if the checkboxes in 2b ('Taxable amount not determined', 'Total distribution') existed in 2019. They aren't mentioned in the solution, so I used the values from my single 1099-R on both 'copies'. Was that the correct thing to do? In my case it was 'Taxable amount not determined: unchecked', 'Total distribution: checked').

[macuser_22]

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@Another Dave B wrote:

Thanks. I just hit the same issue so I can confirm it's still a problem as of 2/19/2022 (TurboTax Premiere Desktop edition). The UI has changed since the original answer was posted and there were a few more questions to say 'no' to, but otherwise the solution worked as is for me.

I'm not sure if the checkboxes in 2b ('Taxable amount not determined', 'Total distribution') existed in 2019. They aren't mentioned in the solution, so I used the values from my single 1099-R on both 'copies'. Was that the correct thing to do? In my case it was 'Taxable amount not determined: unchecked', 'Total distribution: checked').

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The "not determined" box has existed since 1975, but it has noting to do with this question.

See my post at the start of this thread for hoe to enter it, assuming that your 1099-R had a code "G" in box 7.

[RunningManAloha]

Thanks for this info.   This is still an issue with TurboTax -- I have encountered this same issue for tax year 2022.  It's March, 2023 and TT does not support this with a single 1099-R form.   I will split it into two as advised.   TY.