1099 R for 401k after-tax rollover to Roth

[jtax]

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@heybrian1 wrote:

I think it would be a bad idea for me to deselect the IRA/SEP/SIMPLE box on my own in TT as it would not match the 1099-R my 401k administrator sent to the IRS. Yet deselecting the box is the only way forward with the TT software. There must be a work around in "forms" right?

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I do not think that TT is sending the IRS a 1099-R based on what you type in. 

Rather it is using the information you type in (and your answers to its questions) to determinate what numbers to put on 1040 line 5a and 5b and perhaps a few other places. (E.g. Form 8606).

What really matters is that the correct amounts appear on 1040 line 5a/5b.

If the IRS does question you, then you just show them your records. Keep your forms requesting the direct rollover, keep the statements showing it leaving the 401k and arriving in the IRA. Writing a letter and showing them the documentation will likely solve the matter. Might take a long time, but should make it right.  What's in the 1099s are information to the IRS. So they can find non-reporters or incorrect reporters. But they can be wrong or incomplete. You can only be taxed on your actual income. The burden of proof is certainly on you if the 1099 is wrong I wouldn't worry too much about this if you retain easy proof of the direct rollover.

Of course I could easily be wrong here. And if you are in doubt it is always a good idea to consult with a a CPA, enrolled agent, or tax attorney, who does this for a living, has malpractice insurance, etc.

[heybrian1]

The latest advice I've received is to Uncheck the IRA/SEP/SIMPLE box in TT software whereby correcting the 1099-R myself (which will create a mismatch from the actual 1099-R) and e-file. Is this bad advice?  

[DianeW777]

No, it's not bad advice. Entering the actual documents is a convenience and helpful for you to complete the return.  It appears the form was incorrectly completed by checking that box since it was a 401(k) distribution going into an IRA.  So TurboTax is correct and indicating the conflict.

The distribution itself was not an IRA so for this reason it should not be checked.  If you are unable to obtain a corrected Form 1099-R, then you should keep all of the documentation together and deselect that box to complete your tax return.  Accuracy is the key to completing your tax return and companies make mistakes.

@heybrian1

[dmertz]

Since there is no tax withholding shown on this Form 1099-R, the fact that you did not mark the IRA/SEP/SIMPLE box on TurboTax's 1099-R form will not be communicated to the IRS in your e-filing.  However, the fact that the IRA/SEP/SIMPLE box is marked on the form that the IRS receives from the plan might make them wonder where the rollover contribution indicated on the Roth IRA's Form 5498 came from.  For a rollover or conversion to a Roth IRA there should be a corresponding Form 1099-R, and a form with code G with the IRA/SEP/SIMPLE box marked does not correspond.  So as DianeW777 said, be prepared to explain if the IRS ever questions this rollover.