Need guidance on how to answer TurboTax’s questions on “Rollover of 401(k) to ROTH 401(k)”.

[acnorwood]

I need guidance on how to answer TurboTax’s question on “Rollover of 401(k) to ROTH 401(k)”.   The question is:

“Is this 1099-R reporting a rollover of funds from a 401(k), 403(b) or governmental 457(b) to a designated ROTH 401(k) or ROTH 403(b) plan?”

I don’t understand how to answer this question.   In 2024, I requested an In-Plan ROTH conversion of Before Tax/Pre-Tax funds from a governmental 457(b) plan. This is a conversion to ROTH within the same 457(b) plan.  The plan sent a 1099-R  showing “G” on Box 7.  The distribution is fully taxable because it was Before Tax funds converted to ROTH within the same Plan.  However, TurboTax’s question did not say that it was rolled over/transferred into an In-Plan ROTH account or to a 457(b) plan.  Rather it states “… to a designated ROTH 401(k) or 403(b) plan."  How should this question and the subsequent questions be answered in TurboTax to reflect an In-Plan ROTH Conversion of a 457(b) plan?

[dmertz · Accepted solution]

Answer Yes.  This question is simply to asking if this was any kind of In-plan Roth Rollover (IRR) rather than a rollover to a Roth IRA and the TurboTax developers failed to include Roth 457(b) in the list of receiving account types.  Answering Yes avoids TurboTax inappropriately treating the rollover as adding to Roth IRA basis and avoids TurboTax excluding the taxable amount of the rollover from MAGI for the purpose of a Roth IRA contribution.