Taxes on Roth 401k to IRA rollover

[dcmm014555]

In 2019 I rolled a long-standing Roth 401k into a new Roth IRA and withdrew the funds.  I had the investment company withhold 10%, thinking that would cover or more than cover my maximum penalty.  After entering the 1099-R into TurboTax, it shows I owe a very large sum in taxes still.  A few questions:

- Is this in error or are these circumstances under which the funds are treated as new income that can be taxed again?

- Does the 10% penalty apply to the entirety of the funds, or just the portion which was earnings in the 401k years and in the IRA after transfer?

- Should the investment company (both accounts were with the same company) have told me, or be able to tell me, how much is true contributions vs. earnings?

- Is there somewhere in TurboTax where I need to enter additional information to indicate the portion of the funds which has already been taxed?

[dmertz]

I assume that by "long-standing" you mean that you had the Roth 401(k) for more than 5 years.  Were you also over age 59½ at the time of the distribution from the Roth 401(K)?

Did you do a direct rollover from the Roth 401(k) and received a code H Form 1099-R for the rollover to the Roth IRA?  Does the Form 1099-R from the 401(k) show an amount in box 5?

What is the code in box 7 of the Form 1099-R for the distribution from the Roth IRA?

Assuming you were under age 59½ and had no other money in Roth IRAs, the amount in excess of what you contributed to the Roth 401(k) would be taxable and subject to a 10% early-distribution penalty.  The amount of your contributions to the Roth 401(k) should be present in box 5 of the Form 1099-R.  TurboTax should pick this amount up and treat it as contribution basis in your Roth IRAs, but sometimes it seems that that doesn't happen and you need to enter it manually.  Make sure that you have clicked the Continue button on the Your 1099-R Entries page and have addressed all of the questions there.

[VictorW9]

If your 1099 is not telling you what is taxable, which is possibly the case, as your account was rolled over from another, you will have to figure the contribution amount of the account. You can of course contact the investment companies for that information. The IRS of course keep track of both contribution and earnings in your account so you will have to make sure you have the correct contribution amount and adjust appropriately.

[dmertz]

The IRS does not "track" contributions and earnings, the IRS can only determine the taxable amount by manually reviewing all of an individual's Forms 1099-R and 5498 over the years, the same information that is provided to the individual.  Assuming that there have been no other contributions to Roth IRAs, the information on the Forms 1099-R and knowing whether or not the individual was under or over age 59½ at the time of the distribution from the Roth 401(k) should be all that is necessary to determine the taxable amount of the distribution, as long as the Roth 401(k) administrator has provided all of the information on the Form 1099-R that they are responsible to provide.

[dcmm014555]

Thank you very much!  You led me to what I was missing, which is that they had issued a 1099-R for the closed 401(k), not just the IRA.  So I had missed entering important information about the contributions.