I made error when I converted 401k to IRA. I meant to convert it to traditional IRA but instead converted to Roth IRA. The conversion occurred in November 22'. Any solution?

[footballjoe34]

I made a mistake when I converted my previous work's traditional 401k to IRA. I meant to convert it to traditional IRA, but I accidentally converted to Roth IRA. . How can I fix this problem? Box 2 = 0 , box 7 = g. Now turbotax is saying I made an excessive contribution into my IRA accounts. Thank you!

[DanaB27]

Do not enter the conversion as an IRA Roth contribution in the IRA contribution interview (if you did please delete it).

You will only need to enter your Form 1099-R and answer the follow-up questions:

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Enter your Form 1099-R information
5. On the "Did you move this money from a 401(k) to a Roth 401(k)?" screen answer "No"
6. On the "Did you move the money to a Roth IRA?" screen answer "Yes"

Please be aware, a conversion to Roth IRA from a pre-tax 401(k) is a taxable event. And your current Form 1099-R is incorrect.

If box 2a taxable amount has wrongly $0 and code G in box 7 for the conversion to Roth IRA then you will either have to ask the issuer if they will give you a correct Form 1099-R or you will have to make changes to your Form 1099-R to get TurboTax to report the rollover as taxable. Enter a zero in box 5 and indicate in the follow-up questions that the distribution was rolled over to a Roth IRA. Please see this excellent discussion from dmertz for additional information.

[dmertz]

There is no alternative to treating this as a rollover to the Roth IRA.  This transaction is irrevocable.  Your tax return must include the taxable amount of this distribution on line 5b of Form 1040 from the 401(k), the amount in box 1 of the From 1099-R minus any amount in box 5.

[footballjoe34]

So I don't need to ask for a corrected 1099-R from Charles Scwab / complete a substitute Form 4852?

[dmertz · Accepted solution]

Ideally you would have a Form 1099-R that had in box 2a the taxable amount of the Roth conversion.  Because the error was not theirs, Schwab will almost certainly decline to change the Form 1099-R.  You could enter a substitute Form 1099-R which will give you the opportunity to provide explanation as to why the rollover was actually taxable.  You could also just enter the Form 1099-R as is but making sure that box 5 has a number in it even if it is zero, then indicating to TurboTax that the rollover was to a Roth IRA.  Doing so will cause TurboTax to treat the rollover as taxable, but the IRS might question this reporting (although the IRS often doesn't mind seeing too much taxable income being reported).

[footballjoe34]

Thank you! I created a substitute Form 1099-R to show the corrected taxable income. After all that, now TurboTax is saying my "Roth Contribution Was Too High" and I need to move the "excessive" contributions out of my IRA.

Is this correct?

[dmertz]

If the rollover from the traditional 401(k) to the Roth IRA increased your modified AGI above the threshold where a Roth IRA contribution becomes limited, you will have an excess Roth IRA contribution if you made a regular contribution (not the rollover) to a Roth IRA in excess of the permissible amount.  The rollover to the Roth IRA itself is not an excess contribution.  You have not mentioned making any contribution to a Roth IRA.  Nothing about the rollover from the 401(k) is to be entered under Deductions & Credits.