How to enter 1099-R with Distribution code H when values in Box 1 and Box 5 are different

[poncho_mike]

In 2024 my employer began offering the Roth IRA option.  I contributed money to both Roth and standard 401-K.  Since I'm over 59 1/2, I rolled most of my 401-K (pre-tax and post-tax) to a self-directed IRA.

I received a 1099-R showing a distribution of $25K in Box 1 (gross distribution) and $24K in Box 5 (Roth Contribution).  I would have expected those numbers to be equal.  The Box 2a taxable amount is $0.

I know when you have a Code G rollover, you have to enter it as two separate 1099-Rs, one for pre-tax and one for post-tax.  Do I handle the $1K difference?  If there was a $1K amount in Box 2a, it would have made sense to me.  

Can anybody tell me why the numbers in Box 1 and Box 5 are different, and what is the status of the $1K difference?

[dmertz]

First, the Roth account in the employer plan is not a Roth IRA.  It is a designated Roth account in the 401(k).

Enter the Form 1099-R as received, no splitting.  TurboTax will treat the $24k from box 5 as contribution basis in your Roth IRAs.

[poncho_mike]

@dmertz Yes,

I misspoke.  My employer began offering a Roth 401-K plan, not a Roth IRA.

This is a broader question.  If I have been contributing to a Roth IRA for over 20 years and I'm over 60 yrs old, do I need to keep track of the basis for my Roth accounts?  It's my understanding I can pull money out of the Roth and since the oldest account is over 5 yrs old and I'm over 60, distributions ar tax free.   I quit keeping track of my basis on the Roth IRAs once I turned 60.

Any thoughts would be appreciated.

[dmertz]

You are correct.  However, the 5-year Roth IRA qualification clock began running on January 1 of the year for which you first made a Roth IRA contribution.  The 5-year qualification clock for your Roth 401(k) does not transfer to your Roth IRAs with the rollover.  Until the 5-year qualification period for your Roth IRAs has been completed, any Roth IRA earnings distributed will be subject to ordinary income tax.

If you made your first Roth IRA contribution for some year prior to 2021, any distributions you take from your Roth IRAs in 2025 and beyond will be qualified distributions and there would be no need to know your basis in Roth IRA contributions and Roth conversions.

[poncho_mike]

@dmertz 

Let's say that more than five years ago, I contributed before and after-tax money to my 401-K plan.  At the time, my after-tax money wasn't called a Roth 401-K, it was simply after-tax contributions to my company's 401-K plan.  I was never clear on what the difference was.  The total for all contributions was somewhere in the $60K range annually.  Since my company allows in-service distributions, about once a quarter I rolled the after-tax money into a self-directed Roth IRA and the earnings on the after-tax contributions into a before-tax IRA.  So the Roth IRA has been open for somewhere around seven years.

Since I started making after-tax contributions, I've been rolling over them into my Roth IRA several times a year.  Then in 2024, my employer offered the Roth 401-K option, still allowing after-tax contributions that total somewhere around $70K.  For this seven year period, I've been consistently moving money to the self-directed Roth.

I assumed that since I've had that Roth IRA open in excess of five years, anything I take out will not be taxed.  If I understand you correctly, the money that has been in the account for less than five years could be taxed.  Does the brokerage holding my Roth IRA do a First In, First Out on my distributions?  Or is it up to me to keep track.

I'm not taking distributions yet, but I expect to in about one more year.

Thanks for your help. 

[dmertz]

Because you are over age 59½ and made your first contribution to a Roth IRA more than 5 years ago, any distribution that you now receive from your Roth IRAs is a qualified, nontaxable distribution which is reportable only on Form 1040 line 4a.

[poncho_mike]

@dmertz 

I just wanted to be clear on this.  Any money I take out of the original Roth IRA is tax-free as this account has been open for a long time.   The Roth IRA that contains the after-tax rollover from my current 401-K was opened in 2022.  Do I need to wait 5 years before I withdraw any money from that Roth IRA for the distributions to be tax-free?   Should I continue to keep these two Roth IRAs separate for tax reasons?

Thanks for your help.  I don't want to screw this up.

[dmertz]

"Do I need to wait 5 years before I withdraw any money from that Roth IRA for the distributions to be tax-free?"

No.  The 5-year qualification period is based only on your first Roth IRA contribution and applies to all of your Roth IRAs.  All of your Roth IRAs are treated in aggregate as if they were all one large Roth IRA.