I did a Roth 401K Rollover to a Roth Rollover IRA. 1099r shows taxable amount 0. When I enter the "H" code on line 7, it taxes it?

[gjjsnyder]

IRS and distributing investment company agree it should not be a taxable event.  I believe the H code is calculating incorrectly.

[dmertz · Accepted solution]

I found your comment to an answer I gave a year ago indicating that your code H Form 1099-R has box 2b Taxable amount not determined marked.  I forgot all about the fact that TurboTax will treat as taxable a code H Form 1099-R with that box marked and a blank box 2a.  That's the cause of the symptom you are seeing.  I'm glad to see that you stuck with it.

You have an improperly prepared Form 1099-R from the payer.  A code H Form 1099-R is required to have a zero in box 2a and box 2b Taxable amount not determined NOT marked.  It's odd that TurboTax treats a code H Form 1099-R with this error as taxable, but it seems to be such a rare occurrence that the payer makes this error that it hasn't raised the attention of the TurboTax Product Quality folks.  I think it's unlikely that TurboTax's behavior with regard to this will change before the filing deadline since the problem has been in TurboTax for years.

As a workaround, simply enter a zero in box 2a.  Since there is no tax withholding in box 4, the details of what you enter on TurboTax's 1099-R form are not included in the e-filing, so the fact that you entered a zero in box 2a will not be apparent to the IRS.  What *will* be apparent to the IRS is that your tax return shows the distribution correctly as nontaxable.

[MinhT]

Your 1099-R has been correctly coded in box 7. Code H means Direct rollover of a designated Roth account distribution to a Roth IRA. The rollover is not taxable. And by entering code H in box 7, TurboTax will not tax it (I have tested it).

Please revisit your form 1099-R and follow the interview to the end. If it still does not work, delete the form 1099-R and reenter it.

[dmertz]

In the summary, TurboTax will show it as income (which, under the tax code, it is) but not as taxable income.

[gjjsnyder]

I went through the 1099r entry with a TurboTax rep (deleted and reentered it), and it still taxed it as a fully taxable transaction.  I think the CD version of Home and Business has a problem.

[dmertz]

That's extremely unlikely.  [Edit: But it turns out to be the case.  See my answer.]  How are you determining that TurboTax is treating it as taxable?  The only reliable place to look is Form 1040 line 4b.  If it's not being included on line 4b, it's not being taxed.

[dmertz]

Make sure that you are *not* entering under Deductions & Credits anything regarding this transaction.  All of the entry is made by entering the Form 1099-R.

[gjjsnyder]

I am looking at the info at the top of the form showing the tax implication + or - for Federal Tax Due.

[dmertz]

[Deleted]

[dmertz]

In my answer above I've provided the workaround to this TurboTax behavior that is being triggered by the Form 1099-R that was prepared incorrectly by the payer.

[Bishop88]

I have same issue with Roth 401k rollover to Roth IRA.  H is checked in Box 7 but Box 2b indicated taxable amount not determined.  The rollover is showing up as pension income on line 5b of 1040.  When I uncheck box 2b and enter $0 in Box 2a Form 1040 5b goes to $0 .  I would have assume the H in Box 7 would result in Turbotax not taxing. 

[dmertz]

A code H Form 1099-R must always have a zero in box 2a and box 2b Taxable amount not determined unmarked; direct rollovers from a designated Roth account in a qualified retirement plan like a 401(k) are always nontaxable and the payer should know that.  Are you sure that the 2b box that is marked is not the Total distribution box?

Enter $0 in box 2a and it won't matter if you mark box 2b Taxable amount not determined or not.

[Bishop88]

My box 2a is blank.  2b is checked.  Box 7 has code H.  When I enter $0 in 2a and uncheck box 2b it all works as it should--1040 is updated with $0 income.   I would have guess the H code would have overridden the blank 2a and show $0 income but it didnt

[dmertz]

TurboTax is not particularly well behaved when faced with with Forms 1099-R that are prepared improperly.

[Bishop88]

Yep all worked.