How to correct IRA mess-up

[mkla]

So I was attempting to complete a backdoor Roth conversion and accidentally moved my money from my traditional IRA to a previously funded pre-tax rollover IRA, instead of my Roth. Before I realized the mistake, I then consolidated the rollover IRA with my work's 401K at a different financial institution (taking with it the money that was supposed to have gone into the roth).  My work was able to withdraw that money and place it in a Roth once I explained what happened. 

I want to properly report this on my taxes this year, but the 1099-R from the original institution is of course wrong (it doesn't report the traditional IRA withdrawal at all, and only shows the transfer of the rollover to the work 401(k).  Should I create a substitute 1099-R to reflect the money taken from the traditional IRA?

[dmertz]

If the movement of the money from one traditional IRA to another was done by trustee-to-trustee transfer where the funds were never made payable to you personally but were instead paid directly from one IRA to the other (apparently the case since this transaction is not reflected on any Form 1099-R), the transfer is not reportable.  A trustee-to-trustee transfer of one traditional IRA to another is neither a distribution nor a rollover.

The bigger question is whether or not the corrective distribution from the 401(k) was done properly since the rollover of your entire traditional IRA balance to the 401(k) apparently resulted in the impermissible rollover to the 401(k) of your basis in nondeductible traditional IRA contributions.

[mkla]

So I’ll use made up numbers just to make it easy

Non-deductible IRA had $10,000

Deductible Rollover had $50,000

Work 401k had $100,000

the $10,000 from the IRA was to go (back door) to a Roth (in which case I should have had a 1099-R for the $10,000 

in error, it got transferred to the rollover, which then had $60,000;  $10,000 of which was non-deductible. 

not knowing my mistake at the time, I moved the $60,000 rollover to my 401k. So now the 401k has $160,000;  $10,000 of which was non-deductible. Once I realized, I moved the $10,000 from the 401k to a Roth (which is where it should have gone in the first place)

Anyway, my hope is to report the 10,000 since a portion is taxable earnings from the traditional IRA, and to keep my basis in check. 

[dmertz]

I suspect that the corrective distribution from the 401(k) itself was not eligible for rollover to a Roth IRA.  When was the corrective distribution from the 401(k) made?

If it was made in 2020, what is the code in box 7 of that Form 1099-R?

If it was made in 2021, do you know what code will be present in box 7 of the 2021 Form 1099-R?

Presumably the Form 1099-R for the rollover to the 401(k) shows $60,000 with code G (or less likely, code 1 or 7).  It seems that the rollover from the traditional IRA to the 401(k) would be considered to consist of $10,000 of failed rollover, so that $60,000 probably needs to be reported with two substitute Forms 1099-R, one showing a $50,000 code G rollover to the 401(k) instead of $60,000 and another with code 1 or 7, depending on your age, showing a regular distribution that you then converted to the Roth IRA, likely after the 60-day rollover deadline pursuant to IRS Revenue Procedure 2016-47 self-certification that the late rollover would qualify for a waiver of the 60-day rollover deadline.