topic 1099-R 401K after tax contributions rollover to Roth IRA and IRA account in Retirement tax questions

1099-R 401K after tax contributions rollover to Roth IRA and IRA account

bzahabi — Fri, 07 Feb 2020 16:59:04 GMT

Hi There,

In October, 2019, I rolled over $5,900 from my 401K to Roth IRA and traditional IRA account.

Out of the $5,900 gross distribution, $5,092.86 were after tax contribution and they were rolled over to my Roth IRA, and $807.14 were dividends (taxable) and they were rolled over to my IRA account.

I received my 1099-R tax form from Fidelity, and the form lists :

Box 1: Gross distribution: $5,900

Box 2a: Taxable amount: $0.00

Box 2b: Taxable amount not determined (not checked)

Total Distribution (not checked)

Box 3: Capital Gain: $0.00

Box 4: Federal Income Tax withheld: $0.00

Box 5: Employee Contrib/Desig Roth Contrib or Insurance Premiums: $5,092.86

Box 6: $0.00

Box 7: G and IRA/SEP/Simple (not checked)

The rest of the boxes: 8,9, and 10 either empty or $0.00

I uploaded 1099-R PDF into Turbo Tax Deluxe, using the upload feature, and went through the series of the questions that Turbo-Tax asks. After I was done, I saw that my refund was decreased because of $807.14 that Rolled over to Traditional IRA account.

Just to make sure that the refund decrease was related to the 1099-R for, I deleted it from Urbo-Tax, and my refund amount went up to the previous amount I had before uploading 1099-R form.

My question:

If I rolled over the taxable amount $807.14 to IRA account, why am I being taxed on the amount?

I talked to a fedelity 40K specialist and he said that I should not be taxed on any of the 401K $2900 gross distribution that I rolled over to Roth IRA and IRA.

I am not sure what I missing here and why Turbox Tax is considering $807.14 as taxable even though they were rolled over to IRA.

I aprreciate your response on this.

Regards.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

DianeC958 — Fri, 07 Feb 2020 17:43:39 GMT

The code G on the 1099R indicates that the amount was rolled over to another retirement account and it should not be reported as taxable.

When I run the scenario in TurboTax it is not including the rollover amount as taxable.

Please review and make sure that you are answering all of the questions after you put the information for you 1099-R.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

dmertz — Fri, 07 Feb 2020 18:22:44 GMT

TurboTax does not directly handle this situation. To report this using TurboTax you must split the Form 1099-R into two, one for the portion rolled over to the Roth IRA and the other for the portion rolled over to the traditional IRA, with the boxes on the split forms totaling the amounts shown in the corresponding box of the original. The box 5 amount will be included only on the one for the rollover to the Roth IRA.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

bzahabi — Fri, 07 Feb 2020 20:06:43 GMT

Hi,

Thx for the quick response;

One of Turbo Tax questions, that I get while going through 1099-R load, is the following:

"--------------------------------------------------------------------------------------------- Start of Question

Rollover of 401(k) to Roth IRA

FIDELITY INVESTMENTS

If you made any after-tax contributions to your 401(K) plan, that amount will be generally be reported to you in box 5 of your 1099-R. If you made after-tax contributions and there isn't an amount in box 5, you can enter the correct amount here. If the amount in box 5 was incorrectly reported, you can make any necessary adjustment here.

After-Tax Contributions to 401(k) OR 403(B) : 5,092.86

"----------------------------------------------------------------------------------------- End of question

It lists the correct amount in Box5; however, no where it asks me for the amount that was rolled over to Traditional IRA account $807.14

Should I change the amount listed in the Turbo Tax question above to show the full gross distribution amount which is $5,900 (both Roth IRA $5092.86 and Traditional IRA $807.14 rollover)?

I tested that, and if I put $5,900 instead of $5,092.86 nothing gets taking out as taxes.

Thx

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

bzahabi — Fri, 07 Feb 2020 20:10:50 GMT

Thank you. I just saw your reply after I sent another one.

I'll will definitely try your suggestion.

Regards.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

cdl222 — Sat, 29 Feb 2020 23:57:52 GMT

I have a similar problem. In 2019 I rolled over $50K of my 401K Aftertax Savings from my former employer to my brokerage, after retirement. Of the $50K, $30K was my after tax contribution and $20K was earnings. I received 2 checks for the 2 amounts in the name of my brokerage - the check of $30K (my after tax contribution) indicating Roth IRA was deposited in my Roth IRA account, and the check of $20K indicating Traditional IRA into a traditional IRA account, at the same brokerage, which I converted into a Roth IRA later, also in 2019.

I received 2 1099-R’s

1) from my former employer for the total rollover:

Box 1: $50K

Box 2a: $0

Box 5: $30K

Box 7: G (direct rollover of a distribution to a qualified plan… or an IRA)

IRA/SEP/SIMPLE : blank

2) from my brokerage for the Roth conversion:

Box 1: $20K

Box 2a: $20K

Box 7: 7

IRA/SEP/SIMPLE (x)

I followed dmertz’s answer above and split my employer’s 1099-R into 2 for the 2 amounts in Turbotax - $30K and 20K

Then I entered my brokerage’s 1099-R for the Roth conversion of the above $20K

TurboTax now shows a gross income of $70K ( 30+20+20), with the $20K conversion as taxable. Is the gross income in TurboTax correct? Thanks so much.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

dmertz — Sun, 01 Mar 2020 00:57:11 GMT

Yes, $50k on Form 1040 line 4c and $20k on line 4a is correct, totaling $70k of reported income, with only $20k being taxable.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

fe0660 — Sat, 21 Mar 2020 17:11:43 GMT

I am in a similar situation where I had my 401K after-tax contributions go to a Roth IRA, and the earnings on those contributions go to a traditional IRA. When you say to split the Form 1099-R, do you mean to manually input two manually created 1099-Rs to reflect two transactions, and not include a 1099-R in the form it was provided to me? Will this spike an audit flag to the IRS since something doesn't match? What about TurboTax accuracy guarantee when I start to play around with the forms?

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

dmertz — Sat, 21 Mar 2020 18:47:46 GMT

fe0660, yes, that's correct. If the original Form 1099-R shows no tax withholding, which should be the case if the funds were moved by direct rollover, the details of the Forms 1099-R are not included with your e-filing and the IRS will be unaware that you made the entry by splitting the original Form 1099-R.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

aloyscius — Thu, 04 Jun 2020 02:18:17 GMT

Hello @dmertz,

I have the exact same issue as the OP and have a follow-up question regarding the Mega Backdoor Roth-IRA:

Should the subsequent messages that occur after you split the original 1099-R's content into the two separate portions in TurboTax (one for the after-tax contributions rolled over to a Roth-IRA and another for the pre-tax earnings rolled over to a Traditional IRA) then be answered as follows?

After-tax contributions that were rolled over to the Roth-IRA:

"No, this money didn't roll over to a designated Roth-401(k) account"
"Yes, this money was rolled over to a Roth-IRA account"
"Yes, I made after-tax contributions to this 401(k)"
"After-tax contributions to 401(k)" - This should be equal to Box 5 of the original 1099-R

Pre-tax earnings that were rolled over to a Traditional IRA:

"No, this money didn't roll over to a designated Roth-401(k) account"
"No, this money wasn't rolled over to a Roth-IRA account"

I appreciate your help on this topic.

Thank you.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

macuser_22 — Thu, 04 Jun 2020 03:06:48 GMT

Sounds about right but you did not say what you put in box 1 and 2a.

TurboTax does not directly support a single 1099-R going to two different destinations.

What you must do is split the 1099-R into two 1099-Rs.

For the amount rolled to the Traditional IRA.

1) In box 1 use the original 1099-R box 1 minus the box 5 amount.

2) Box 2a = 0.

3) Box 5 = blank.

4) Box 7 = G.

5) Answer NO to the two interview questions that ask about a Roth - the default is a Traditional IRA.

For the amount rolled to the Roth IRA.

1) In box 1 enter the original box 5 amount.

2) Box 2a - 0.

3) Box 5 = original box 5 amount.

4) Box 7 = G.

5) Answer NO to the first interview question about a 401(k) Roth and YES to the rollover to a Roth IRA.

That should properly report the 1099-R. The box totals of the two 1099-R should equal the amounts on the original 1099-R.

Nothing about splitting into two 1099-R's go on a tax return - the IRS only gets the dollar amounts on the 1040 form.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

aloyscius — Fri, 05 Jun 2020 03:37:58 GMT

Thank you very much @macuser_22 ! Your detailed response helps greatly simplify the situation.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

BlueSky27709 — Wed, 26 Jan 2022 14:56:30 GMT

I have a somewhat similar question. I took advantage of the option to roll pre-tax contributions that were made to a traditional IRA into my employers 401k (they allow it). I did this specifically so I could isolate and then roll out my after-tax contributions (from the same IRA ...yes, we had co-mingled pre and after tax contributions over the years) into my Roth IRA. I received two 1099-R's from Vanguard, one which shows the the pretax rollout to the 401K as not taxable (correct), but the second 1099-R shows the rollout to the Roth as taxable (not correct). Vanguard says they consider any rollouts from an IRA as taxable and have no way of knowing or differentiating pre from post tax contributions. I do recall when I processed the rollout to my Roth there were all sorts of messages asking me to swear this was after-tax money, so not sure why the 1099-R says the entire amount is taxable.

That said, how do I address this when I do my taxes, because that 1099-R will be incorrect.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

Critter-3 — Wed, 26 Jan 2022 15:09:01 GMT

The second 1099-R for the conversion to the ROTH needs you to enter the BASIS (aka the after-tax contributions) ... return to the 1099-R entry section and complete the basis questions.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

BlueSky27709 — Wed, 26 Jan 2022 15:32:48 GMT

I don't anywhere on that screen that asks for basis or has basis questions.

Also, the distribution Code for Box 7 is 7, and there is nothing designated in the other box under it.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

GeorgeM777 — Mon, 31 Jan 2022 22:09:43 GMT

It appears as if you want to move money from your after-tax traditional IRA to a Roth IRA. If that is the case, the movement of after-tax funds is called a "conversion."

As a way of background, any amount in a non-Roth IRA that is converted to a Roth IRA is treated as a distribution from the non-Roth IRA and is therefore taxable. To add to a previous response, if the non-Roth IRA has a basis because contributions (other than rollover contributions) have been made that were nondeductible, then that part of the distribution is treated as a return of basis and is not taxable. It appears as if you feel that your 1099-R is incorrect because upon entering the information into TurboTax, you get a result reflecting that the funds you are converting are taxable when you believe the opposite should be the case. Follow the below steps to convert your traditional IRA to a Roth IRA.

Step 1: Enter the Non-Deductible Contribution to a Traditional IRA

Open your return if it’s not already open
Inside TurboTax, search for ira contributions and select the Jump to link in the search results
Select Traditional IRA on the Traditional IRA and Roth IRA screen and Continue
Answer No to Is This a Repayment of a Retirement Distribution?
On the Tell Us How Much You Contributed screen, enter the amount contributed and continue
Answer No on the Did You Change Your Mind? screen
Answer the questions on the following screens, until you reach Choose Not to Deduct IRA Contributions. Select Yes, make part of my IRA contribution nondeductible and Continue

Step 2: Enter the Conversion from a Traditional IRA to a Roth IRA

Inside TurboTax, search for 1099-r and select the Jump to link in the search results
Answer Yes to Did you get a 1099-R in 2021?, then Continue
- If you land on the Your 1099-R Entries screen, select Add Another 1099-R
Select how you want to enter your 1099-R (import or type it in yourself) and follow the instructions
Answer None of these apply when you reach the screen Do any of these situations apply to you?
Select I converted some or all of it to a Roth IRA on the Tell us if you moved the money through a rollover or conversion screen
Next, choose Yes, all of this money was converted to a Roth IRA
Continue answering questions until you come to the Your 1099-R Entries screen

To check the results of your traditional IRA to Roth IRA conversion, see your Form 1040:

On the left side of your screen, select Tax Tools, then Tools
Under Tool Center, select View Tax Summary
On the left side of your screen, select Preview my 1040
- Your Roth IRA amount should be listed on Form 1040, Line 4a as IRA distributions
- Taxable amount should be zero unless you had earnings between the time you contributed to your Traditional IRA and the time your converted it to Roth IRA, then the earnings would be taxable
- Schedule 1, Line 20 IRA deduction, should be blank
Select Back on the left side of your screen to return to where you left off in TurboTax

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

nc cpl — Mon, 31 Jan 2022 23:00:29 GMT

George - first, much thanks for the step by step guide!! However, when I work my way through the additional screens (incl questions for my wife) (Step 1, #7) it says we do not qualify for any contributions to be nondeductible (i have an employer retirement plan and total income too high), so.... itdoes not present a screen with the option "Choose Not to Deduct IRA Contributions. Select Yes, make part of my IRA contribution nondeductible and Continue." It just closes out the IRA section entirely. Am I at a dead end at this point?

If I skip to checking my results, Line 4a shows has the total of the two 1099-r's specific to this move (amount sent to my 401k and another for amount converted into the Roth I have). Line 4b indicates "Rollover" and shows zero as the taxable amount. On Schedule 1, Line 20, IRA Deduction, it is blank as you indicate it should be.

Anything else I need to do or correct?

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

Critter-3 — Mon, 31 Jan 2022 22:55:03 GMT

" #7, it says we do not qualify to make any of our contributions nondeductible "

Are you allowed to make IRA contributions at all ? Do you have earned income ? If you cannot make the contributions then of course none of them can be non deductible.

If you have not yet completed the INCOME section then please do so now and return to the IRA section later.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

nc cpl — Mon, 31 Jan 2022 23:14:13 GMT

Critter - yes, we can still make nondeductible contributions as in most previous years, but thats not my question.

My question is related to a "rollout" of funds from my TIRA, divided between my employers 401K which allows "roll ins" from a TIRA, with the remaining after-tax contributions rolled into a Roth IRA (thus separating the pre from the post tax contributions in the TIRA, making it easier to account for down the road and no longer having to keep track of a "comingled" TIRA). Its a move not done by many, but perfectly acceptable if you have a comingled funds in an TIRA and want to separate them (and an employer plan that accepts the pretax rollout).

However, the confusing aspect of doing this (this will likely be my only time doing it) is that the 1099-R shows the after tax amount sent to the Roth as taxable, even though it isn't (Vanguard confirms this is how its reported since all move such as this are treated as taxable. So you have to make sure you report it correctly so you aren't double taxed on it.

Re: 1099-R 401K after tax contributions rollover to Roth IRA and IRA account

Critter-3 — Mon, 31 Jan 2022 23:13:12 GMT

Ok ... roll overs are reported in the 1099-R section ONLY .. They are NOT contributions so you should not be entering them as such in the IRA contribution section.