The prompts clearly told me to click "No" if it was rolled over to an IRA, but then it never gave me any option to address it further and marked it as income. It's not a ROTH, so it wasn't income for me.
Was it a "direct rollover" to the IRA (i.e., the 401(k) custodian cut the check directly to the IRA custodian)? If so, it should have been reflected as such on your 401(k) 1099-R. If not, you will have to enter the amount you rolled over separately elsewhere in the interview (you may have to do that even for direct rollovers).
Note that if it's NOT a direct rollover, taxes were probably withheld from the rollover check. Since the gross (not net) distribution reduced by rollovers is taxable, that means you have to make up any tax withholding from the rollover check with your own funds to avoid taxation and possible penalties.
The amount rolled over from the 401(k) to a traditional IRA is indeed income, meaning that it must be reported on your tax return, but it is nontaxable income that has no effect on your tax liability. The amount must appear on From 1040 line 5a but will be excluded from line 5b, with the word ROLLOVER shown next to the line. TurboTax will do this for you.
If the Form 1099-R has code G but the 401(k) plan mistakenly left box 2a blank, enter a zero in box 2a of TurboTax's 1099-R form to make sure that TurboTax treats it as nontaxable.
I'm using the Deluxe version of Turbo Tax received on a CD ROM and it does not give me a Line 5a and a Line 5b, only a Line 5, and therefore it is showing that I owe a ton of taxes. Am I doing something wrong or do I need to use a different version of Turbo Tax. Help please!!
@1laureljones1 , you seem to be looking at something other than Form 1040. Form 1040 (or Form 1040-SR) with its lines 5a and 5b is the same in all versions of TurboTax as required by the IRS.
Oh yes, you're correct. I was looking at the 1099R. I do see 5a and 5b now, but I don't know how to get it to input the word "ROLLOVER"......
It appears from searching online, this has been a glitch in Turbo Tax as far back as 2013. It will not let you put the word "ROLLOVER'' on Line 5b. So people have to print out their 1040s and mail them in, marking the form themselves with the word "ROLLOVER". This is unbelievable!! Apparently the IRS is okay with handling it this way. Have you heard this?
Yes this is a known issue. I commented on it here:
I have a 401k direct rollover to rollover IRA. TurboTax did not subtract the converted amount. Where in TT interview i change this?
If you had a direct rollover of your 401K to a Traditional IRA, you should have received a Form 1099-R with Code G in Box 7 to indicate the rollover.
TurboTax shows the total amount on Line 5a of Form 1040, but there is no 'Taxable Amount' on Line 5b.
If your 1099-R has a Code other than G in Box 7, go back to your 1099-R entry and indicate that you rolled over the funds in the follow-up questions.
And I don't want it to show as income as an increased AGI will mess up my healthcare benefits.
A distribution will show as income on the summary screen however a direct rollover is not taxable and will not be reported as such on the form 1040 ... review that form well.
If you are looking at a summary screen or review screen those show the full amount as income and lump a lot of stuff together. You need to check the actual 1040 form and make sure it's right.
If you rolled it over it should say Rollover to the left of the taxable amount on 4b or 5b.