topic 401K roll over distorts income in Retirement tax questions

401K roll over distorts income

RTLL1958 — Sat, 15 Feb 2020 21:13:33 GMT

Rolled over my traditional 401k to my new employer's plan. Followed all directions, all's well; I can see that I am not be taxed on the distribution.

However, my return now shows a grossly distorted income due to the roll over showing as income. This may be of no technical consequence.... but it sort of bothers me.

When entering the roll over distribution info and amounts I was expecting an opportunity to show off-setting entries; that is, xxx-amount distribution from the previous IRA and the same xxx-amount shown as being rolled-over into the new IRA, with one entry washing out the other, so to speak

Did I miss a step?

Thanks

RTLL

Re: 401K roll over distorts income

MaryK4 — Sat, 15 Feb 2020 21:33:21 GMT

Yes, TurboTax includes the rollover as income even if it is not taxable- it is just the TurboTax treatment. I think it so you can make sure all income is entered, but I tend to agree it can be confusing and unnecessary- it does not affect any tax.

Re: 401K roll over distorts income

dmertz — Sun, 16 Feb 2020 05:29:01 GMT

No, you did not miss a step. This is indeed considered under the tax code to be income even though it is nontaxable. It is required to appear on Form 1040 line 4c but has no other effect on your tax return or anything else because it is excluded from line 4d.

Re: 401K roll over distorts income

RTLL1958 — Sun, 16 Feb 2020 06:00:35 GMT

Thanks for the help!

RTLL

Re: 401K roll over distorts income

dylpicklebug — Mon, 23 Mar 2020 23:00:02 GMT

I understand what you say about it not being taxed, HOWEVER, because it shows up as income, the State (OR) is using it as income, and therefore expects me to pay back $13k for our Marketplace Insurance. Is this right?? Even though we reinvested ALL of it? Thank you!

Re: 401K roll over distorts income

DavidD66 — Mon, 23 Mar 2020 23:23:40 GMT

The Oregon tax form starts with Federal Adjusted Gross Income, which does not include the amount of the distribution/rollover, so I don't see how Oregon would be using it to determine your eligibility for Marketplace insurance.