Its technically considered income, which is why it will show up on the income summary pages in TurboTax. But, it is NOT taxable income (provided your rollover was done properly and to a Traditional IRA), so it does not effect your income numbers on the tax return (AGI and taxable income).
You can view the distinction best by looking directly at a copy of Form 1040. Look at Line 15a and 15b and the distinction the IRS makes between the income and taxable income lines. Only 15b - taxable income actually gets used in the calculations. But, the whole rollover amount will show on Line 15a.
Its technically considered income, which is why it will show up on the income summary pages in TurboTax. But, it is NOT taxable income (provided your rollover was done properly and to a Traditional IRA), so it does not effect your income numbers on the tax return (AGI and taxable income).
You can view the distinction best by looking directly at a copy of Form 1040. Look at Line 15a and 15b and the distinction the IRS makes between the income and taxable income lines. Only 15b - taxable income actually gets used in the calculations. But, the whole rollover amount will show on Line 15a.
but this considered as income, that mean you have to pay tax with didn't make sense.
No, if you did a Rollover, and you did it properly it is not a taxable event. On your 2019 tax return you can see that the amount is posted to Pension in 4c, but if you look at 4d it will show zero.
So yes it did show up as income on line 4c, but because you rolled it over it does not show up as taxable income.
The lines cited do not correspond with the lines on the 2019 Tax Form please interepolate
What lines did they show up as? Was it lines 4A and 4B because you may have accidentally indicated these were IRA rollovers when you prepared your return. If so, go through your 1099R entry you reported this on and see if you checked the Box that says The IRA/SEP/SIMPLE box is checked on my copy of the 1099-R. if so, uncheck it. that box is located between Boxes 7&8 in your 1099R.
Does it get included in the AGI and thus may disqualify one from getting an economic relief stimulus check?
No, a 401K to IRA rollover will not disqualify you from an economic stimulus payment - it is technically considered income, but it is NOT taxable income (provided your rollover was done properly and to a Traditional IRA). It will not affect your AGI or taxable income.
You can see how this is reported on a 2020 Form 1040 by looking at lines 5a and 5b. Line 5a will show the full amount of the rollover distribution, but line 5b will show "0" as the amount of taxable income.
Thank you. Great answers for 2019 and 2020. I am relieved to find the answer so quickly. Not only quickly but precise and to the point. Thank you!
I was a little concerned it was being added to my AGI but no; I must look at Form 1040. 2020 box 15a and 15b. In 2019 4c and 4d. It's not taxable income--like it is suppose to be and the reason I chose a rollover.
I still don't see why it is added to INCOME, since it is not "new" money, rather it is money I already had in my company 401(k). I rolled it over into a new Traditional IRA and/or Roth IRA (depending on whether it was Trad or Roth 401(k) dollars), and got the 1099-R forms from the investment companies showing that. I rolled 3 "old" 401(k) accounts into Trad and Roth IRAs with my main investment company, which bumped my AGI in TT2020 to more than 2X what it really was. Yikes!
If you entered the rolled over correctly it It will not affect your AGI or taxable income. Please check line 5 on your Form 1040, 5b taxable amount should be $0.
Please answer all follow-up questions carefully when enter your 1099-Rs.
@DAVEWYNNE
It appears that my rollover of $25,000 (non-taxed) bumped my income over the threshold for the credit in the Health Insurance Marketplace so now I have to pay back some of my credit. Does this make sense?
Thanks,
Cindy
No, a non-taxable rollover is not considered income for the calculation of the premium tax credit. To determine the modified AGI, it is your AGI on Form 1040 Line 11 plus any non-taxable interest reported on Line 2a of Form 1040, the non-taxable portion of your social security and any housing allowances from the foreign earned income exclusion. To preview your 1040:
If your premium tax credit dropped significantly after entering a rollover IRA or 401(k), you may want to check to make sure that it is indeed not being taxed. The taxable amount, if any, would appear on Line 4b or Line 5b.
Thanks. I am now thinking the rest of my income was higher than the max. I couldn't remember the max income I could have and still receive the full credit.
The premium tax credit will cover the entire cost of a health insurance policy if it is cheaper than the second lowest cost silver plan and your household income is 150% or less of the federal poverty level for your household size.
You are also eligible for the maximum credit if you or your spouse were unemployed at any time in 2021.