After leaving an employer, my wife rolled her 401k into two IRAs. Her non-Roth portion of her 401k went into her traditional IRA and the Roth portion of her 401k went into a Roth IRA. We were told to do this so that she wouldn't be taxed on the rollover. She received two 1099-R. Both had an amount in Gross Distribution and $0 for taxable amount. Everything was entered correctly in TurboTax but when it asked the question if this 401k was rolled over into a Roth IRA and I answered "Yes", my $4,000 tax refund became $7,000 due. Obviously I did something wrong because why would I be charged $11,000 taxes when the taxable amount on the 1099-R was $0. Can anyone tell me where I went wrong?
Make sure the Box 7 Distribution Code in the Form 1099-R interview or input area for the 401(k) Roth account is entered as "H". That should tell TurboTax that it is a nontaxable distribution. Any other code will be treated as taxable.
The 1099-R going to traditional should have a box 7 code G. The 1099-R going to the Roth should have code H. If not, you can contact the issuer for corrected forms.
I want to withdraw my 401K money and I need form 1099-R
If you want to withdraw money from your 401k, then you should contact your 401k custodian (financial company that maintains the 401k). They will help you to process a withdrawal or distribution from your account.
Then, in early 2021 you will receive a Form 1099-R from that financial company showing the amount of money that you took out of your 401k. You will use that Form 1099-R on your 2020 tax return to pay taxes (and possibly a penalty) on the amount that you took out.