I do not understand why a direct rollover from one retirement account to another is considered income, even though it is not taxable income. I did not receive the funds as they were handled by the funds administrators.
The rollover is included in your total income, but it is not considered taxable income, for tax purposes.
The rollover from an IRA would be shown in Box 16a (as nontaxable) Form 1040. If the entire amount is rolled over (most often with Code "G" in Box 7 of the 1099-R), the line 16b remains blank (it means zero taxable amount) and the rollover would not be included in taxable income. (Form 1040A line 12a and b).
If you'd
like, you may preview Form 1040, before paying for the program to verify the
nontaxable treatment.
The rollover is included in your total income, but it is not considered taxable income, for tax purposes.
The rollover from an IRA would be shown in Box 16a (as nontaxable) Form 1040. If the entire amount is rolled over (most often with Code "G" in Box 7 of the 1099-R), the line 16b remains blank (it means zero taxable amount) and the rollover would not be included in taxable income. (Form 1040A line 12a and b).
If you'd
like, you may preview Form 1040, before paying for the program to verify the
nontaxable treatment.
This does not seem correct to me, that a complete rollover to another 401K would be counted as income. I did not have access to the funds and never took possession of the funds at any time. Why does this affect my adjusted gross income.
@Celtic1001 wrote:
This does not seem correct to me, that a complete rollover to another 401K would be counted as income. I did not have access to the funds and never took possession of the funds at any time. Why does this affect my adjusted gross income.
A 401(k) rollover is reported on the 1040 form line 5a as income, but not taxable income as indicated by a zero on line 5b with the word ROLLOVER next to it. It is NOT included in AGI and does not affect the tax.
(It it was not income then the IRS would not require that it be reported on an "income" tax return.)
The IRS requires that the rollover is shown on the return. A direct rollover is required to be shown but is not taxable.
The rollover is included in your total income, but it is not considered taxable income, for tax purposes.
The rollover from an IRA would be shown in Box 16a (as nontaxable) Form 1040. If the entire amount is rolled over (most often with Code "G" in Box 7 of the 1099-R), the line 16b remains blank (it means zero taxable amount) and the rollover would not be included in taxable income. (Form 1040A line 12a and b).
If you are looking at the TT Income Summary, that only shows the gross figures, and is just FYI.
I see that there is a Rollover on line 5a of my federal income but IT HAS been included in my AGI. Is it supposed to be included in AGI if it is rolled over from retirement plan to Roth IRA?
Is it included on line 5b? What code is in box 7? Unless it was rolled over from a Roth retirement account it is taxable.
If you are seeing the amount on 5b and not 5a, please delete the 1099-R and re-enter it.
You should then see it on 5a, with the word "Rollover" printed on the Form 1040.
To see the lines on the tax return follow these steps:
It does say rollover with no amount in 5a but then in 5b there is an amount and it says rollover and is calculated in my total income and agi. Is it because I rolled over to Roth IRA from traditional retirement plan?
Yes. You should have rolled over to a regular Traditional IRA. What plan did you roll it over from? A 401K?