topic Re: 1099-R withholding in Retirement tax questions

1099-R withholding

lklenhart — Mon, 10 Feb 2025 19:36:45 GMT

I rolled over my 403(b) when I moved from one company to another. My 1099-R indicates that the bank withheld federal taxes when they rolled it over, so now it appears that I didn't deposit the full amount in the new retirement account and I'm getting charged the additional tax as it sees it as an unqualified distribution. How do I enter it into TurboTax to show the only amount that didn't roll over was federal tax withholding?

Re: 1099-R withholding

DanaB27 — Fri, 14 Feb 2025 09:13:26 GMT

If you had taxes withheld in a rollover then you need to replace these taxes from other funds, otherwise the taxes withheld are deemed as distributed and will be taxable income subject to the early withdrawal penalty.

Re: 1099-R withholding

lklenhart — Sat, 15 Feb 2025 08:11:47 GMT

Thank you for the reply! I learned a bit more information. I contacted the trust holding my 403(b). They indicated I had one account, but two types of funds - Roth & Traditional Pre-tax. My deduction was going into the Roth and the company match was going into the Traditional Pre-tax. So when I did the roll over, because I was rolling it over into a Roth IRA, they took taxes out on the Traditional fund. So by taking the taxes, it converted the traditional to Roth. It doesn't seem right that I would have to pay a withdraw penalty for that. Does this information change your response? I truly appreciate your expertise!

Re: 1099-R withholding

DanaB27 — Sat, 15 Feb 2025 16:13:30 GMT

No, my answer remains the same. If you had taxes withheld in a conversion then you need to replace these taxes from other funds, otherwise the taxes withheld are deemed as distributed and will be taxable income subject to the early withdrawal penalty. The funds used to pay the taxes didn't make it to the Roth IRA, therefore they were distributed.

Re: 1099-R withholding

lklenhart — Sat, 15 Feb 2025 19:15:36 GMT

I can still fund the account through April 15, correct?

Re: 1099-R withholding

DanaB27 — Sun, 16 Feb 2025 14:55:17 GMT

The April 15th deadline applies for regular IRA contributions. For the rollover you had 60 days, if you are still within this window then make sure you let the custodian know this is from the rollover and not a new contribution. Please see IRS How much can I roll over if taxes were withheld from my distribution? for additional information.