1099-R 401K after tax contributions rollover to Roth IRA and IRA account

[bzahabi]

Hi There,

In October, 2019, I rolled over $5,900  from my 401K to Roth IRA and traditional IRA account. 

Out of the $5,900 gross distribution, $5,092.86 were after tax contribution and they were rolled over to my Roth IRA, and  $807.14 were dividends (taxable) and they were rolled over to my IRA account.

I received my 1099-R tax form from Fidelity, and the form lists :

Box 1: Gross distribution: $5,900

Box 2a: Taxable amount: $0.00

Box 2b: Taxable amount not determined (not checked)

                Total Distribution (not checked)

Box 3: Capital Gain: $0.00

Box 4: Federal Income Tax withheld: $0.00

Box 5: Employee Contrib/Desig Roth Contrib or Insurance Premiums: $5,092.86

Box 6: $0.00

Box 7: G and IRA/SEP/Simple (not checked)

The rest of the boxes: 8,9, and 10 either empty or $0.00

I uploaded 1099-R PDF into Turbo Tax Deluxe, using the upload feature, and went through the series of the questions that Turbo-Tax asks. After I was done, I saw that my refund was decreased because of $807.14 that Rolled over to Traditional IRA account.

Just to make sure that the refund decrease was related to the 1099-R for, I deleted it from Urbo-Tax, and my refund amount went up to the previous amount I had before  uploading 1099-R form.

My question:

If I rolled over the taxable amount $807.14 to IRA account, why am I being taxed on the amount? 

I talked to a fedelity 40K specialist and he said that I should not be taxed on any of the 401K $2900 gross distribution that I rolled over to Roth IRA and IRA.

I am not sure what I missing here and why Turbox Tax is considering $807.14 as taxable even though they were rolled over to IRA.

I aprreciate your response on this.

Regards.

[DianeC958]

The code G on the 1099R indicates that the amount was rolled over to another retirement account and it should not be reported as taxable.

When I run the scenario in TurboTax it is not including the rollover amount as taxable.

Please review and make sure that you are answering all of the questions after you put the information for you 1099-R.

[dmertz · Accepted solution]

TurboTax does not directly handle this situation.  To report this using TurboTax you must split the Form 1099-R into two, one for the portion rolled over to the Roth IRA and the other for the portion rolled over to the traditional IRA, with the boxes on the split forms totaling the amounts shown in the corresponding box of the original.  The box 5 amount will be included only on the one for the rollover to the Roth IRA.

[bzahabi]

Hi,

Thx for the quick response;

One of Turbo Tax questions, that I get while going through 1099-R load, is the following:

"--------------------------------------------------------------------------------------------- Start of Question

Rollover of 401(k) to Roth IRA

FIDELITY INVESTMENTS

If you made any after-tax contributions to your 401(K) plan, that amount will be generally be reported to you in box 5 of your 1099-R. If you made after-tax contributions and there isn't an amount in box 5, you can enter the correct amount here. If the amount in box 5 was incorrectly reported, you can make any necessary adjustment here.

     After-Tax Contributions to 401(k) OR 403(B) : 5,092.86

"----------------------------------------------------------------------------------------- End of question

It lists the correct amount in Box5; however, no where it asks me for the amount that was rolled over to Traditional IRA account $807.14

Should I change the amount listed in the Turbo Tax question above to show the full gross distribution amount which is $5,900 (both Roth IRA $5092.86 and Traditional IRA $807.14 rollover)?

I tested that, and if I put $5,900 instead of $5,092.86 nothing gets taking out as taxes.

Thx

[bzahabi]

Thank you. I just saw your reply after I sent another one. 

I'll will definitely try your suggestion. 

Regards.

[cdl222]

I have a similar problem.  In 2019 I rolled over $50K of my 401K Aftertax Savings from my former employer to my brokerage, after retirement. Of the $50K, $30K was my after tax contribution and $20K was earnings.  I received 2 checks for the 2 amounts in the name of my brokerage - the check of $30K (my after tax contribution) indicating Roth IRA was deposited in my Roth IRA account, and the check of $20K indicating Traditional IRA into a traditional IRA account, at the same brokerage, which I converted into a Roth IRA later, also in 2019.

I received 2 1099-R’s

1) from my former employer for the total rollover: 

Box 1: $50K

Box 2a: $0

Box 5: $30K

Box 7: G (direct rollover of a distribution to a qualified plan… or an IRA)

IRA/SEP/SIMPLE : blank

2) from my brokerage for the Roth conversion:

Box 1: $20K

Box 2a: $20K

Box 7:   7

IRA/SEP/SIMPLE  (x)

I followed dmertz’s answer above and split my employer’s 1099-R into 2 for the 2 amounts in Turbotax - $30K  and 20K

Then I entered my brokerage’s 1099-R for the Roth conversion of the above $20K

TurboTax now shows a gross income of $70K ( 30+20+20), with the $20K conversion as taxable.  Is the gross income in TurboTax correct?  Thanks so much.

[dmertz]

Yes, $50k on Form 1040 line 4c and $20k on line 4a is correct, totaling $70k of reported income, with only $20k being taxable.

[fe0660]

I am in a similar situation where I had my 401K after-tax contributions go to a Roth IRA, and the earnings on those contributions go to a traditional IRA.  When you say to split the Form 1099-R, do you mean to manually input two manually created 1099-Rs to reflect two transactions, and not include a 1099-R in the form it was provided to me?  Will this spike an audit flag to the IRS since something doesn't match?  What about TurboTax accuracy guarantee when I start to play around with the forms?

[dmertz]

fe0660, yes, that's correct.  If the original Form 1099-R shows no tax withholding, which should be the case if the funds were moved by direct rollover, the details of the Forms 1099-R are not included with your e-filing and the IRS will be unaware that you made the entry by splitting the original Form 1099-R.

[aloyscius]

Hello @dmertz,

I have the exact same issue as the OP and have a follow-up question regarding the Mega Backdoor Roth-IRA:

Should the subsequent messages that occur after you split the original 1099-R's content into the two separate portions in TurboTax (one for the after-tax contributions rolled over to a Roth-IRA and another for the pre-tax earnings rolled over to a Traditional IRA) then be answered as follows? 

After-tax contributions that were rolled over to the Roth-IRA:

1. "No, this money didn't roll over to a designated Roth-401(k) account"
2. "Yes, this money was rolled over to a Roth-IRA account"
3. "Yes, I made after-tax contributions to this 401(k)"
4. "After-tax contributions to 401(k)" - This should be equal to Box 5 of the original 1099-R

Pre-tax earnings that were rolled over to a Traditional IRA:

1. "No, this money didn't roll over to a designated Roth-401(k) account"
2. "No, this money wasn't rolled over to a Roth-IRA account"

I appreciate your help on this topic.

Thank you.

[macuser_22]

Sounds about right but you did  not say what you put in box 1 and 2a.

TurboTax does not directly support a single 1099-R going to two different destinations.

What you must do is split the 1099-R into two 1099-Rs.

For the amount rolled to the Traditional IRA.

1) In box 1 use the original 1099-R box 1 minus the box 5 amount.

2) Box 2a = 0.

3) Box 5 = blank.

4) Box 7 = G.

5) Answer NO to the two interview questions that ask about a Roth - the default is a Traditional IRA.

For the amount rolled to the Roth IRA.

1) In box 1 enter the original box 5 amount.

2) Box 2a - 0.

3) Box 5 = original box 5 amount.

4) Box 7 = G.

5) Answer NO to the first interview question about a 401(k) Roth and YES to the rollover to a Roth IRA.

That should properly report the 1099-R. The box totals of the two 1099-R should equal the amounts on the original 1099-R.

Nothing about splitting into two 1099-R's go on a tax return - the IRS only gets the dollar amounts on the 1040 form.

[aloyscius]

Thank you very much @macuser_22 ! Your detailed response helps greatly simplify the situation.

[BlueSky27709]

I have a somewhat similar question. I took advantage of the option to roll pre-tax contributions that were made to a traditional IRA into my employers 401k (they allow it). I did this specifically so I could isolate and then roll out my after-tax contributions (from the same IRA ...yes, we had co-mingled pre and after tax contributions over the years) into my Roth IRA. I received two 1099-R's from Vanguard, one which shows the the pretax rollout to the 401K as not taxable (correct), but the second 1099-R shows the rollout to the Roth as taxable (not correct). Vanguard says they consider any rollouts from an IRA as taxable and have no way of knowing or differentiating pre from post tax contributions. I do recall when I processed the rollout to my Roth there were all sorts of messages asking me to swear this was after-tax money, so not sure why the 1099-R says the entire amount is taxable.

That said, how do I address this when I do my taxes, because that 1099-R will be incorrect.

[Critter-3]

The second 1099-R for the conversion to the ROTH needs you to enter the BASIS (aka the  after-tax contributions) ... return to the 1099-R entry section and complete the basis questions. 

[BlueSky27709]

I don't anywhere on that screen that asks for basis or has basis questions.

Also, the distribution Code for Box 7  is 7, and there is nothing designated in the other box under it.