Error in box 2a on 1099-R from Thrift Savings Plan

[vickipendergrass]

My husband began withdrawing his TSP in 2021, mostly rolling it into a Roth IRA. I just finished withdrawing mine this year, also mostly to a Roth IRA. All of our TSP accounts were with pre-tax dollars. The 1099-R he received last year, the one I received this year and the past 8 years, with distribution code G, has the taxable amount equal to the gross distribution amount (Box 1 and Box 2a show the same amount). For some reason, probably the "new TSP system", the 1099-R he received this year with distribution code G, shows the taxable amount exactly half of the gross distribution amount. I don't think this is correct, but I contacted TSP and they assured me that the amount shown in 2a on the 1099-R he received is correct. I am reluctant to file using the amount they show in 2a. Help?

[MonikaK1]

Generally, as you noted, all of the money in your TSP account is taxed as ordinary income when you receive it. This is the case when neither the contributions to your traditional TSP balance nor its earnings have been included previously in your taxable income. The way that you withdraw your account balance determines when you must pay the tax.

If any of your TSP distributions came from a Roth TSP, qualified distributions from your Roth TSP aren't included in income. If you have a uniformed services TSP account that includes contributions from combat pay, the distributions attributable to those contributions are tax-exempt.

If you ask the TSP to transfer any part of the money in your account, from traditional contributions and earnings to a traditional IRA or a different qualified retirement plan, the tax on that part is deferred until you receive payments from the traditional IRA or other plan. 

Review the source of your contributions and the accounts to which the distributions were transferred to see whether any of these exceptions apply. The TSP representative with whom you spoke may not have had all of the information needed.

See IRS Publication 721 for more information about civil service retirement benefits.

If, after reviewing this information, you believe your Form 1099-R is incorrect, contact the TSP for more information.

[dmertz · Accepted solution]

Assuming that nothing is shown in box 5, the code-G Form 1099-R with the box 2a amount being half of the box 1 amount implies that half of the gross amount was directly rolled over to a traditional IRA and half was directly rolled over to a Roth IRA.  If the entire gross amount was directly rolled over to a Roth IRA, the Form 1099-R is incorrect, whoever at the TSP told you that it was correct is misinformed, and the Form 1099-R needs to be corrected.

If the TSP refuses to correct the form, you'll need to file a substitute Form 1099-R (Form 4852) showing the correct taxable amount in box 2a and providing explanation.

I recall several posts here about Forms 1099-R being incorrect due to the change in the TSP reporting system.

[vickipendergrass]

Thank you. It was all rolled over to a Roth, just like last year, when it was all designated as taxable. I was not aware of doing a substitute 1099-R. Thanks again.