I withdrew from a 401k with an employer to deposit it into a 403b with a new employer. What do I need so that I am not taxed on this withdrawal?

[SweetieJean]

Did you do so within 60 days?

[Opus 17]

If you receive a check, the first plan is probably required to withhold 20%.  You must roll over the gross amount, not the net amount, into the new plan.  You would then get the withholding back at the end of the year.  If you only deposit the net amount, the withheld amount becomes a taxable distribution.

(For example, if you withdraw $50,000 and the plan withholds $10,000; you must deposit $50,000 in the new plan.  If you only deposit $40,000, the other $10,000 becomes a taxable distribution, and you should expect to pay 40-50% of that--up to $5000--in taxes and penalties.  If you have to borrow the extra amount, 9 months worth of interest is probably better than the tax and penalties on the distributed amount.)

It is always better to do a direct transfer from plan to plan, since there is no withholding then.  You can also only do one rollover like this per year; but you can do as many direct plan to plan transfers as the plans will allow. 

At the end of the year, you get a 1099-R from plan 1, you will mark on your tax return that you did a rollover or transfer to another qualifying plan.

[Hal_Al]

You must complete the rollover within 60 days. That is, you must deposit the $50,000 (using the example above) in the new 403b plan within 60 days of taking it out of the old 401k.

[dmertz]

Because the new plan (the 403(b)) provides no reporting to the IRS to substantiate receipt of the rollover, the IRS will often question the reporting on your tax return of such indirect rollover because most rollovers from qualified retirement plans are to IRA accounts that *do* report to the IRS the receipt of rollover contributions (Form 5498).  To preempt the IRS questioning the completion of the rollover to a qualified retirement plan like a 403(b), is often a good idea to provide an explanation statement with your tax return to explicitly indicate that the rollover was to the 403(b).

[Anonymous]

following dmertz suggestion will require you to paper file.  there's no way to attach an explanation to an efiled return.  

[clvolpe]

Thank you for your help! I did complete the rollover within 60 days, and I was able to withdraw the full amount because the 401k company knew I was transferring it to a 403b.

When I enter the 1099-R information into TurboTax however, it does not give me the option to indicate that I did a rollover to a qualifying plan and decreases the amount of my return. Is there a way to note this?

Also, should I have received a copy of Form 5498 from my 403b plan provider (if they did submit one)? Is it possible they have another type of form I can enter into TurboTax that will counter the effects of entering the 1099-R?

[clvolpe]

Thank you for your help! I did complete the rollover within 60 days, and I was able to withdraw the full amount because the 401k company knew I was transferring it to a 403b.

When I enter the 1099-R information into TurboTax however, it does not give me the option to indicate that I did a rollover to a qualifying plan and decreases the amount of my return. Is there a way to note this?

Also, should I have received a copy of Form 5498 from my 403b plan provider (if they did submit one)? Is it possible they have another type of form I can enter into TurboTax that will counter the effects of entering the 1099-R?

[VolvoGirl]

What code is in box 7 on the 1099R?  It may already indicate it was a rollover.  Check your return, it should say ROLLOVER by line 4b and no taxable amount.  

[clvolpe]

Thank you! The code in box 7 "GB". There is not a 4b box, but box4 is labeled "Federal Income tax withheld" and says $0.00.

[Opus 17]

"GB" is not a thing.  "G" is a direct rollover.  "B" is a distribution from a designated Roth account.  Was this a Roth 401(k) being rolled over into a Roth 403(b)?

Try just using code G, and see if Turbotax recognizes it properly.

[VolvoGirl]

I mean line 4b on your actual 1040 return.  Is there an amount on 4b?

[Hal_Al]

If you have code GB in box 7, of your 1099-R; at the 1099-R screen, in TurboTax, enter code G in one box 7 and code B in the 2nd box.
You are allowed to rollover a Roth 401k to a Roth  403b at a new employer

[dmertz]

Codes G and B together in box 7 indicate that this was a *direct* rollover, *not* a 60-day indirect rollover, between Roth accounts in qualified retirement plans.  No explanation is required for the IRS to understand that this is nontaxable rollover to another qualified retirement plan.  The codes G and B together tell them that.  The fact that you transported the check to the new plan does not make this an indirect rollover since you never had receipt of the funds yourself.

Since box 7 has both codes G and B together, both codes must be entered as Hal_Al indicated.  Since the codes G and B together indicate a direct rollover of the Roth 401(k), the 401(k) provider is required to have put a zero in box 2a of the Form 1099-R which you must enter in box 2a of TurboTax's form.  TurboTax automatically knows to treat this as nontaxable and will not ask any more questions regarding this rollover.  TurboTax will include the entire gross amount on form 1040 line 4a but will exclude the entire amount from line 4b of Form 1040.

[Hal_Al]

TurboTax will also put the word "rollover" on line 4 of form 1040