IRA Distribution

[Mtnbillie]

My husband's company rolled over his 401k into an IRA while he was out of work due to Covid.  Later in the year he took a full distribution, it was only $3,500 and he was over 59 1/2.  He received two 1099 Rs - the first has Code G in box 7 (which is a full rollover) but TT does not ask us if it rolled over to another traditional IRA, only asks if it rolled over to a Roth account.  When we enter the second 1099R it has Code 1 in box 7 and this does ask us what we did with it (cashed it out). 

The problem I'm having with TT is that it is doubling the amount in our income summary, adding almost $7,000, even though this is the same money and it should only be adding $3,500.  Is this a glitch in TT?

[Opus 17 · Accepted solution]

They are two completely separate transactions, so ignore the second when entering the first.

For the first 1099-R, check that it was rolled over to another IRA or qualified plan. (You only get the option of a Roth if you select "I did a combination of things" for the question before, so that's probably where the mistake is.)

For the second 1099-R, you would report that you kept the money and it is qualified as a coronavirus-related distribution.  But that section of the program isn't installed yet because the IRS hasn't approved the forms or instructions.  We are guessing mid-february but have heard nothing official on when it will be ready.  I would delete the second 1099-R and enter it when the program is updated. 

[AnnetteB6]

In addition to the information provided by champ Opus17, you mentioned that you are seeing a total of $7000 on your income summary.  This is normal because you did enter information about two transactions that totaled $7000 which took money out of two separate accounts.  This income summary does not necessarily mean that all $7000 is included as taxable income. 

You need to review your actual Form 1040 to check the amount that is actually included as income.  Take a look at lines 4a, 4b, 5a, and 5b.  

If you are using TurboTax Online, use the following steps to preview your Form 1040:

1. Open or continue your return.
2. Select Tax Tools in the left menu.
3. With the Tax Tools menu open, you can then:
   • Select Print Center and then Print, Save, or Preview This Year's Return to preview your entire return, including all forms and worksheets (you may be asked to register or pay first).
   • View only your 1040 form by selecting Tools. Next, select View Tax Summary in the pop-up, then Preview my 1040 in the left menu.

If you are using a CD/downloaded version of TurboTax, click the Forms button in the upper right corner and then select Form 1040 in the left menu panel.

@Mtnbillie

[Mtnbillie]

Thank you, I will try to re add mid February and see if things are updated in TT that correct that.  

[Mtnbillie]

Thank you, yes in checking lines 4a, 4b, 5a, and 5b it does show correctly on my 1040 and only one is added in our taxable income.  Hopefully future updates will correct the summary as it is very confusing.  I'll keep an eye on that and appreciate your time!

[dmertz · Accepted solution]

Both Forms 1099-R must be entered into TurboTax.

For the code G Form 1099-R, TurboTax only needs to ask about rollovers to Roth-type accounts.  If you answer No to both Roth questions, TurboTax knows to treat the distribution as a nontaxable rollover without asking any other questions because code G already indicates that the distribution was rolled over.

It's correct that $7,000 is the amount of income that is reportable on your tax return in the sense that both distributions must be present on your tax return.  You'll see $3,500 included on Form 1040 line 5a for the code-G rollover but this entire $3,500 excluded from the taxable amount on line 5b.  The word ROLLOVER will also appear next to line 5b to indicate why the taxable amount distributed from 401(k) is less than the total amount distributed from the 401(k).  You'll separately see on Form 1040 line 4b the $3,500 taxable distribution from the IRA.

[runbethtnt]

we cashed out my husbands 401 k and rolled it over - the box g is checked.  Then it we with drew some early from the new account - they are both showing - so the part that was rolled over and the part that was withdrawn - this was 2019 so it is basically taxing both

[DavidD66]

The first withdrawal is not taxable since you rolled it over, as long as you did the rollover within 60 days.  After you enter(ed) the 1099-R, there is a page that asks "What Did You Do With The Money From [Retirement Plan]"? See Screen Shot below. Be sure you indicate first that you "...moved the money to another retirement account (or returned it to the same retirement account)."  and the you "rolled over all of this money to another IRA or other retirement account (or returned it to the same account)."

[je001430]

Where do I find the page that asks "what did I do with the distribution from the iRA?  It i not showing up anywhere!  Help!! 

[SamS1]

There is a similar question couple screens after you input the amounts.  They must have changed the wording.  Asking the same question just phrasing it differently.  

[Chevrolet2]

I have taken a distribution from IRA but rolled it over into another IRA. The amount rolled over shows up as income in my 2021 tax return. Is this right? shouldn't this not be included as income? do i just not enter the information?

[VolvoGirl]

Where is it showing as income?  After you entered the 1099R it asks what did you do with it.  Did you say you moved or rolled it over to another account?  Then enter the amount you rolled over.

If you are looking at a summary screen or review screen those show the full amount as income and lump a lot of stuff together. You need to check the actual 1040 form and make sure it's right.

If you rolled it over it should say Rollover to the left of the taxable amount on 4b or 5b.