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kzad05
New Member

Fed/State discrepancy on 1099-R rollover from inherited 401(k)

I was named as the death beneficiary on a 401(k) savings plan of about $47K. The investment company cut me a check for about $38K (withholding 9 thousand and change for federal taxes). I deposited (rolled over?) this check into an IRA. When I filled out my federal return, I indicated this, and TurboTax said because it was being rolled over into another retirement account, I didn't have to pay federal tax on that "income" (and my federal refund accordingly shows that). As I'm going through my Pennsylvania return now, it's telling me that there's a discrepancy between the federal code (4, not a rollover) and the PA code (a rollover).

Do I need to change something in my federal return? Or do I enter that $38K amount in the "basis in retirement plan" box in the prompt on the Gross Compensation Worksheet?

Thank you!
1 Best answer

Accepted Solutions
dmertz
Level 15

Fed/State discrepancy on 1099-R rollover from inherited 401(k)

Code 4 (without code G) on the Form 1099-R indicates a distribution that was not eligible for rollover by a non-spouse beneficiary.  A distribution from a 401(k) to a non-spouse beneficiary is only permitted to be rolled over by direct rollover, reported with codes 4 and G together.  Surprisingly, TurboTax allows you to report a code 4 distribution as a rollover.  Under the tax code, moving an amount that is ineligible for rollover to another retirement account is deemed to be a regular (excess) contribution to that account.

Ignoring the fact that this distribution was ineligible for rollover, code 4 distributions are not taxable in PA.

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3 Replies
dmertz
Level 15

Fed/State discrepancy on 1099-R rollover from inherited 401(k)

Are you the surviving spouse of the deceased?
kzad05
New Member

Fed/State discrepancy on 1099-R rollover from inherited 401(k)

Sorry I should have mentioned that-- no
dmertz
Level 15

Fed/State discrepancy on 1099-R rollover from inherited 401(k)

Code 4 (without code G) on the Form 1099-R indicates a distribution that was not eligible for rollover by a non-spouse beneficiary.  A distribution from a 401(k) to a non-spouse beneficiary is only permitted to be rolled over by direct rollover, reported with codes 4 and G together.  Surprisingly, TurboTax allows you to report a code 4 distribution as a rollover.  Under the tax code, moving an amount that is ineligible for rollover to another retirement account is deemed to be a regular (excess) contribution to that account.

Ignoring the fact that this distribution was ineligible for rollover, code 4 distributions are not taxable in PA.

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