I left an employer this year where I had an outstanding 401k loan. I had that employer process that 401k loan as a Qualified Loan Plan Offset (QPLO). I then deposited the exact amount of the 401k loan, and now matching amount on the 1099-R, into a Traditional IRA within 60 days of leaving that employer. When entering the 1099-R into Turbotax income section, they prompt this. "We need to check if you moved any of this money into another retirement account (or returned it to the same account). In some cases, this can lower your tax liability." Bingo! This is my exact situation, so I choose the option: "I rolled over some or all of it to an IRA or other retirement account within the time limits (normally 60 days)." The following screen confirms "Yes, I rolled over $XXXXX to an IRA or other retirement account (or returned it to the same account)." At this point it lets me know "You won't have to pay taxes on your $XXXXXX rollover from XYZ RETIREMEN COMPANY. Since you rolled the entire amount to another retirement account, you don't have to pay taxes on it. This is because you didn't actually pocket the money, but kept it within a qualified retirement account."
Now, my issue is that when I add the Traditional IRA in the Deductions and Credits screen, even when it asks "Is this a repayment of a Retirement Distribution" and I answer "YES", it still winds up telling me that I have an excess contribute penalty (6%) on the amount > $6000 (and it is significant).
However, this should not be the case. A 401K Loan at a previous company can be taken as a QPLO rollover and if the same amount is deposited into a Traditional IRA, no taxes or penalties are due AND, importantly, the amount does not contribute to the Traditional IRA Maximum contribution. I cannot figure out how to get TurboTax to accept this though.
