My 401K to IRA rollover showing as income on the Turbotax snapshot screen. Box 7 on the 1099-R shows (G)

[AnthonyC · Accepted solution]

Its technically considered income, which is why it shows up on the income summary pages in TurboTax.  But, it is NOT taxable income, so it does not effect your income numbers on the tax return (AGI and taxable income).  

You can view the distinction best by looking directly at a copy of Form 1040.  Look at Line 15a and 15b and the distinction the IRS makes between the income and taxable income lines.  Only 15b - taxable income actually gets used in the calculations.  But, the whole rollover amount will show on Line 15a.

https://www.irs.gov/pub/irs-pdf/f1040.pdf 

[bbailey6265]

Thank you sir

[calvertclan5pa]

Thank you very much for the guidance shared.   We rolled an IRA over within 30 days to a new bank.  It's correctly not taxing us, but showing as income. This is challenging as we have 2 kids in college so it's going against our total income.  The amount of this "income" will erase a small chance we have of getting financial aid toward college.  Is there anything that can be done about considering this income in 2022, which will impact Financial Aid when we apply in the fall of 2023. Thanks again for your expert guidance!

[BrittanyS]

Unfortunately, although the IRA rollover is not considered taxable income, it is listed on the tax return for informational purposes.  

Per the Edmit website, "If you have a rollover retirement account, DO NOT use the IRS Data Retrieval Tool, if possible. The information about your IRA will be reported incorrectly and will likely increase your Expected Family Contribution (EFC). In a helpful article by Virginia Tech, they explain that this happens because “the data retrieval tool does not identify and exclude tax return IRA and/or Pension distributions that have been rolled over into another account.  It will take the IRA/Pension distribution minus the taxable portion of the distribution and enter the result as an untaxed IRA and/or Pension on your FAFSA.
 

If you used the retrieval tool and also had a rollover in the relevant tax year, immediately contact your school’s financial aid office to inform them of the situation, formally request a change and provide IRS Form 1099 for evidence."

It would be best for you to speak with your child's school's financial aid office for additional assistance.

See the link below for more information:

How do Retirement Savings Impact FASFA

@calvertclan5pa