How to enter 1099R (401k rollover to roth IRA) and not get taxed?

[stuffies12]

This is a rollover from my ex-employer's 401k to a Roth IRA. They mailed the checks to me and I deposited them to a Roth IRA. I was told that this is a not taxable event, but the 1099R box 2a taxable has same amount as box 1. Box 2b has Total Distribution. Box 7 has G. IRA/SEP/SIMPLE is not checked. In TurboTax, if I answer no to Roth, I don't get taxed. Do I need to get the Payer to correct box 2a to zero (0)? Is it ok to answer no to Roth? How do I get this done correctly to reflect this as a non-taxable rollover from 401k to Roth IRA?

[Anita01 · Accepted solution]

I'm afraid there is no such thing as a nontaxable rollover from a regular 401k to a Roth IRA.  The amount is always taxable because the money in your 401k would have been taxed when you took distributions.  Your Roth distributions, on the other hand, will not be taxable when you take a distribution, so you have to pay the tax on the rollover amount now.  You do need to say Yes to the Roth question, and then you will be taxed, which is correct.  (I'm assuming this was not a Roth 401k)

You might want to consider recharacterizing oyur Rollover to the Roth before this deadline under the new tax laws.

From the IRS: https://www.irs.gov/retirement-plans/ira-faqs-recharacterization-of-ira-contributions

"Can I recharacterize a rollover or conversion to a Roth IRA?

Effective January 1, 2018, pursuant to the Tax Cuts and Jobs Act (Pub. L. No. 115-97), a conversion from a traditional IRA, SEP or SIMPLE to a Roth IRA cannot be recharacterized. The new law also prohibits recharacterizing amounts rolled over to a Roth IRA from other retirement plans, such as 401(k) or 403(b) plans.

How does the effective date apply to a Roth IRA conversion made in 2017?

A Roth IRA conversion made in 2017 may be recharacterized as a contribution to a traditional IRA if the recharacterization is made by October 15, 2018. A Roth IRA conversion made on or after January 1, 2018, cannot be recharacterized. For details, see “Recharacterizations” in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)."

[bnasstrom11]

I'm having a difficult time with how to enter a conversion. I have the same scenario (moved money from my ex-employer 401K into my roth IRA). I understand this is taxable. Where can I enter this amount to indicate that I put it in the roth IRA? When I try and include it in the amount for my Roth contribution it gives me an error saying that the contribution is higher than my wages so I'll need to pay a fee.

[VolvoGirl]

You do not enter it under Deductions & Credits as a new contribution. It is not a contribution but a Conversion.   Only enter it from the 1099R and answer the follow up questions.  What code is in box 7?  It should ask it you rolled it over.

[bnasstrom11]

Okay, thank you. Box 7 is 1B

[rockwjl]

I don't believe this is quite right.  If you mean "regular 401(k)" as a traditional one (i.e pre-tax), you are correct, but the original questioner (Stuffies12) did not mention a traditional IRA.  Many plans allow after tax contributions as well. My understanding is that a taxpayer can move after-tax contributions to a 401(k) from that 401(k) to a Roth IRA tax free (known as a mega backdoor Roth IRA).   

[dmertz]

The code G in box 7 and box 2a having the same amount as box 1 indicates that there was no after-tax money in this distribution and that the entire amount of this rollover to the Roth IRA was taxable.

Since the original poster indicated receiving two checks, it seems that there might have been a split distribution with the after-tax money paid to this individual, reported on a separate Form 1099-R with code 1, 2 or 7 in box 7, $0 in box 2a and box 5 equal to box 1 which was indirectly rolled over to the Roth IRA and was nontaxable.

[JS7259]

Hi , I have the same problem here on the last minute for filing this year. My personal broker told me to move my 401 k (I made before and after tax 401k contribution) to two  IRA accounts and then open Roth Contributory account to put the after Tax 401k portion. Now I got a 1099-R from the personal Broker for the 401k to IRA then to ROTH contributry account. The 1099-R box2 show taxable  amount.  Box 7 coed is 2 and IRA/SEP/Simple box is checked. I could not figure out how to file tax now. My 401 K management company also sent out 1099-R for my 401k roll out and there is no taxable amount on box 2a and the after TAX portion is shown up on box 5.

Not sure what to do ? I think my broker may make a mistake to do the 2-step Roth conversion for me .

Thanks for the help/advise in advance.

[dmertz]

JS7259, a Form 1099-R with the IRA/SEP/SIMPLE box marked indicates a distribution from a traditional IRA, not from a 401(k).  The code 2 suggests that this distribution was for a Roth conversion from a traditional IRA.  The Form 1099-R from the 401(k) also indicates that you did not do a split rollover, but instead did a single rollover and a subsequent Roth conversion.  The subsequent Roth conversion reported on the code 2 Form 1099-R with the IRA/SEP/SIMPLE box marked ends up being largely taxable, with the nontaxable amount and taxable amounts calculated on Form 8606 (what your were trying to avoid by doing a split rollover) and a substantial portion of your after-tax basis remaining in your traditional IRAs to be applied to reduce the taxable amount of future distributions.

[JS7259]

Thanks so much. I am still not quite understanding the Tax term but apparently my broker may make a mistake to rollover my after Tax 401 K portion. It will be a long battle to clarify with Broker.

Thanks so much.

JS