What form for in-plan 401(k) Roth conversion "income"?

Forum|Forum|7 years ago
June 3, 2019
27 replies
194 views

In December 2018 I made an in-plan conversion of funds within my 401(k) plan, from original non-Roth to Roth. Just as with a Traditional to Roth IRA conversion, I know the money converted will be taxed as ordinary income.

But, I can't figure out where to report it in TurboTax. I can't even find a web reference stating which IRS form to use. It's most likely Form 8606, Lines 16 and 18. But all the text there is specific to IRAs, with no mention of 401(k)s, which concerns me.

Form 8606 takes me to creating a Form 1099-R, since the financial institution hasn't sent one. There I entered the $$ in Box 1 Gross Distribution and in Box 2a as the Taxable Amount. In Box 7 I selected '7' for the 1st code (normal IRA distribution), and left the 2nd code blank. This resulted in Box B4 showing the conversion $$ amount, and I checked the box under that.

On Form 1040, the conversion $$ amount appeared in Line 4b as I think it should.

Does anyone actually know - as opposed to guessing like me - the correct place / codes etc?

TurboTax Premier Windows

Best answer by dmertz

If the In-plan Roth Rollover occurred in 2018, your 401(k) plan is required to have issued to you a 2018 Form 1099-R reporting this. It must have code G in box 7.

If you don't have the Form 1099-R from the plan, contact them to obtain the missing form. Don't try to complete the 1099-R entry without it. (If you haven't received the Form 1099-R, it might be because the transaction did not occur until 2019, in which case it's 2019 income, not 2018 income.)

dmertzAnswer

Level 15

If the In-plan Roth Rollover occurred in 2018, your 401(k) plan is required to have issued to you a 2018 Form 1099-R reporting this. It must have code G in box 7.

TorpotaxAuthor

Level 2

Helpful! Thank you!

BillNJ

Level 2

Did an in-plan 401(k) "conversion" (I know it is technically a "rollover" but am using the TurboTax language) from an after-tax contribution account with earnings in my 401(k) to a Roth 401(k) account within the same 401(k). For federal purposes I show the gross distribution as the entire amount of the after-tax contributions plus earnings, and the taxable amount as just the earnings (not the contributions, since they were already taxed federally).

I'm confused, though, as to the NJ treatment. TurboTax currently seems to be reporting the entire gross conversion amount as taxable NJ income, not just the earnings. I know there are special rules in NJ for pension distributions (the "general" rule and the "3-year" rule) that reduce this, but am not clear if these apply to an in-plan Roth conversion of after-tax contributions.

Can you point me in the right direction on what to look at? Thanks!

GeorgeM777

Alumni - Intuit

If you have a 1099-R, what codes have been entered in Box 7? TurboTax may be applying a tax on the entire amount converted to the Roth IRA because as of January 1, 1984, and according to the NJ Division of Taxation, contributions that employees made to 401(k) plans from their wages were not taxed. Since the contributions were not taxed when made, they are fully taxable when you receive a distribution (withdrawal). If you made contributions to a 401(k) plan before January 1, 1984, your distribution will be treated differently than if all the contributions were made after that date.

NJ Tax Guide_Retiring in NJ

It does not appear that the three-year rule and the general rule apply to Roth IRA distributions. The three-year rule and the general rule related to contributory plans, other than IRAs. If you were required to contribute to your retirement plan, it is a contributory plan. Contributions are usually made through payroll deductions, and, in general, have already been taxed. Your contributions are not taxed when withdrawn. However, any employer contributions and earnings that have not been taxed must be reported.

If you had a contributory plan, and began making withdrawals, you would need to determine the taxable and excludable parts of your distribution. There are two methods you can use to calculate the taxable and excludable parts of a distribution: Three-Year Rule Method and General Rule Method.

NJ Income Tax – Retirement Income

@BillNJ

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

BillNJ

Level 2

The code on my 1099-R, Box 7, is "G" ("Direct rollover and rollover contribution"). I saw your references to Roth IRA, but just to be clear, the amounts from my Roth conversion stayed within the 401(k) plan (the amounts were not rolled to a Roth IRA, but transferred internally to the Roth 401(k) account within my 401(k), if that matters).

I agree that the 3 year and general rule don't apply to IRAs, but this isn't a Roth IRA but a Roth 401(k) plan, and I think a Roth 401(k) is by its nature a "contributory" plan (in order to participate, I am required to contribute) v. a standard non-contributory DB plan. Therefore, I think the 3-year and the general rule do apply here, but would love to know if NJ has given any guidance on Roth 401(k) in-plan conversions.