1099-R

[jawckey]

Pl. clarify.

Background:

A) For year 2022 I contributed post tax dollars via my employer's 401K plan in each pay check. And the provider's plan allowed me to move it immediately into Roth 401K account every pay check. And this does not involve any taxable transaction, and all the money is post-tax. At the end of 2022 I received a 1099-R with a distribution code H in the box 7, and gross distribution in box1.

B) For year 2022, I also contributed to my employer's deferred tax 401K plan. Since I am 63 years and eligible, I rolled this part into my IRA to manage it by myself. So at the end of 2022 I also received another 1099-R with a distribution code G in the box 7. But the Gross contribution amount in box 1 appears to include box 5 roth contribution (of case A) in this form besides the tax-deferred contribution. And box 5 in this form is nothing but box 1 (gross contribution) of the above case A.

I ensured that A + B fits into the allowed IRS limits, including employer contributions.

My question:

I used TurboTax premium and entered both these 1099-Rs and it does treat both as non-taxable transactions. But shows sum of box1 of both as total withdrawals. However, box 5 of case B form is also in box 1 of case A, and is thus double counted and shows so in total withdrawal amount!

So do I skip entering case A form, and just enter case B form only?
If not, how to make turbotax not to double count Case A gross distribution (box1)

[dmertz · Accepted solution]

You must enter both forms.

"At the end of 2022 I received a 1099-R with a distribution code H in the box 7, and gross distribution in box1" 

The code-H Form 1099-R is reporting a rollover from the Roth 401(k) to a Roth IRA.  It does not report anything about the In-plan Roth Rollovers that you did.

"But the Gross contribution amount in box 1 appears to include box 5 roth contribution (of case A) in this form besides the tax-deferred contribution."

In-plan Roth Rollovers and rollovers from the traditional 401(k) to a traditional IRA are both reported with code G, so all of these are properly combined on the single code-G Form 1099-R.  Box 2a should show a taxable amount of $0 as long as the In-Plan Roth Rollovers were immediate so that there was no investment gain  that would be taxable upon rollover to the Roth 401(k).  Even though only a portion of these Form 1099-R represents the In-plan Roth Rollovers, indicate that you rolled the money over to a Roth 401(k).  (TurboTax actually ignores this answer because the reporting is no different than for a rollover to a traditional IRA.)  Be sure to answer No, when asked if this money was rolled over to a Roth IRA, that rollover is handled when you enter the code-H Form 1099-R.

Line 5a of Form 1040 will properly show the combined gross amounts of the two Forms 1099-R.  Line 5b should show $0 (assuming $0 in box 2a of the code-G From 1099-R) and should have the notation "ROLLOVER" next to the line.

[jawckey]

This is a gem of saver. I now learnt from you that ...

- Rolling over of post-tax contributions in401K into a Roth 401K is called in-plan roll over ( which is also reported in code G form)

- Where as rolling over from Roth 401K to Roth IRA is merely called Roll over (reported in code H form)

Thank you very much!  Something is not clear to me yet, But pl. clarify the following.

- I did in-plan roll over of 32K from post tax 401K to Roth 401K (1099-R code H form). Box 1 is 32K.

- I did pretax 401K rollover to IRA for 34K (1099-R code G form) (20.5 + 50yr 7.5K + employer part). Box1 is 66K (Like you said, it also includes above code H box1 amount of 32K in box 5)

When entering the 1099-R code G form, Turbotax is asking 2 questions but 2nd one is based on 1st question.

- 1st question - Is 1099-R reporting rollover of funds from 401K to a designated Roth 401K?

   This appears to be about in-plan rollover you explained.  Should I answer NO or YES here? I thought I must say YES here because like you already mentioned that this form includes both in-plan Roth IRA roll over (YES part) as well as IRA rollover NO part in G form). But only if I say NO to this, it asks the next question that you mentioned as 'Be sure to answer No, when asked if this money was rolled over to a Roth IRA'

- If I said NO to the 1st, Turbo Tax does ask 2nd question 'Was this money Rolled over to Roth IRA'? 

  Since you explained that roth IRA roll over is covered separatelt with Code H form, I should say NO while doing code G form. However, code G form does not even ask me this question if I said YES to 1st question during code G form.

So, pl. tell me what is the correct answer to 1st question for code G form? I was thinking it has to be YES, because code G is reporting both in-plan  roth 401K roll over as well as roth 401K to roth IRA rollover. If I do YES, I am not coming to the 2nd question you mentioned whereI should answer NO.

Actually only when I say YES to 1st question, turbotax is correctly asking me the info about after tax 401K contribution amount (box5). If I say NO, it does ask for this, Nor it asks the 2nd question you referred to that I should say NO. I am a bit lost here. Pl. help.

Secondly, irrespective of YES/NO for 1st question in code G form, 1040 5a shows (66 + 32) = 98K, while I expected it to be just 32 + 34 = 66K only.  Did I enter answer questions wrong that made trubotax do 1040 5a to show 98K instead of 66K ? OR this 98K is the correct way?

[dmertz]

" I did in-plan roll over of 32K from post tax 401K to Roth 401K (1099-R code H form). Box 1 is 32K."

No, that's reported on the code-G Form 1099-R.  The code-H Form 1099-R is for the rollover from the Roth 401(k) to the Roth IRA and is a transaction independent of the In-plan Roth Rollover.

When entering the code-G Form 1099-R TurboTax's question are in regard to just the transactions being reported on this Form:  Yes, you rolled money over to a Roth 401(k), No this transaction did not roll money over to a Roth IRA.  The code-G Form 1099-R has nothing to do with moving money to a Roth IRA.

[jawckey]

Thank you very much for the help. I was somewhat confused by why 1040 line 5a accounts for the post tax mega backdoor Roth IRA of 32K two times, while correctly showing pretax 401K roller of 34K to IRA. So line 5a was 32 + 32 + 34 =98, instead of 32 + 34 = 66.

Guess the mega backdoor went into two stages.

- FIrst time 32K from post-tax 401K to roth 401K

- Second time the same 32K from roth 401K to roth IRA

And thus line 5a may be counting this 32K twice. I ignored it for I didn't understand why it does like that.

[LindaS5247]

You should be entering both forms 1099-R's, and then as you enter each one, the questions that follow will pertain to that particular Form 1099-R.  TurboTax will take your information entered (Distributions Coders, Amounts in Box 1, 2a, 5 & 7 and determine the proper taxability.

Your Form 1099-R with Code "G" is a nontaxable direct rollover.  Your box 2a should be $0,  You stated this was a rollover from your qualified retirement plan, from your employer (i.e. 401(K)) to an IRA.  This is not a taxable event.

Regarding your question # 1 in TurboTax, for the Form 1099-R with the Code G, the question "Is it with respect to your rollover from your 40(K) to Roth 401(K), and the correct answer is "Yes.  The answer to the second question is "No" you did not roll the money to a Roth IRA.

Your Form 1099-R with Code "H" is for a direct rollover from a designated Roth Account (i.e. your Roth 401(k)) to a Roth IRA.  This is also not a taxable event.

It sounds like TurboTax handled it properly.

There is a distinct difference between a Roth 401(K) and a Roth IRA.  Both are funded with "after tax dollars" but a Roth 401(K) is within a qualified plan. 

For a Roth 401(K) there are no income limits. Anyone can contribute to a Roth 401(k), if available by their employer, regardless of income level. In 2022, you can contribute up to $20,500 in a Roth 401(k)—$27,000 if you're age 50 or older.

For a Roth IRA only individuals earning less than $144,000 in 2022—$214,000 for married couples—can contribute to a Roth IRA. Roth IRA contributions, by comparison, are capped at $6,000—$7,000.

Click here for information comparing Roth IRA's to Roth 401(k)'s.

[dmertz]

- First time 32K from post-tax 401K to roth 401K

- Second time the same 32K from roth 401K to roth IRA

And thus line 5a may be counting this 32K twice. 

Exactly as it should.  Line 5a should show $64k.  Line 5b should show zero taxable with the ROLLOVER notation.