Error (I think) on 1099-R is causing me to not be taxed on traditional 403(b) to Roth IRA conversion. Do I need to get a new 1099-R?

[Dan7]

I wanted to convert a 403(b) to a Roth. I had the 403(b) place send the check to my IRA company for a traditional IRA.  After the check arrived, I decided to have the IRA company put it directly into a Roth (instead of traditional) IRA.  I believe the net result is that box 2a on my 1099-R (Taxable amount) is listed as 0, and 2b (Taxable amount not determined) is unchecked.  So, I am not getting taxed on this distribution.  Do I need to get this corrected at the 403(b) company, to send out a new 1099-R?  I would love to correct this on the fly, but am assuming I cannot?I would sincerely appreciate any guidance on this.

[Dan7]

I now understand Vanguard refers to this as a "mid-air conversion."  The 403(b) place won't change the 1099-R, as they though it was going to a traditional IRA.  So, I need to get TurboTax to allow me to add in the income somewhere, I think, without getting a new 1099-R.

[dmertz]

My answer indicates that you'll need to tell TurboTax that you need to submit a substitute 1099-R.  TurboTax will prompt for the required explanation statements that you'll include with your mailed tax return.

[Dan7]

Thank you!  TurboTax tells me if I file electronically, they will handle the explanation statement.  If I mail, they say I need to attach.  Since I will file electronically, I think I don't have to do anything more.  Thank you so much for the help!

[dmertz · Accepted solution]

The check should have been made payable to a traditional IRA for your benefit so that you would not have been able to divert the funds directly to a Roth IRA in disagreement with the Form 1099-R that the 403(b) would eventually be providing showing a zero in box 2a.  However the fact that the money was deposited directly into a Roth IRA does mean that it qualifies as a direct rollover to a Roth IRA despite what the Form 1099-R is showing.

Given that the 403(b) did what you asked, they are unlikely to issue a corrected Form 1099-R showing the taxable amount in box 2a, but you should probably try to get them to correct it.  If they decline to do so, you'll should submit a substitute Form 1099-R (Form 4852) showing the taxable amount in box 2a (the amount in box 1 minus any amount in box 5).  This will require you to provide explanation and to paper-file by mail.

[Dan7]

dmertz -- thank you for your reply. I see it now... I need to go to the enter a new 1099-R, and tell it I need to make a Substitute form.  Thank you for getting me there!

[dmertz]

Yes.  Make sure to delete the original.