401(k) rollover to Roth IRA - Form 8606?

[robs462]

In 2023, I did a full distribution of after-tax funds (contributions + earnings) from my traditional 401(k).  The earnings were directly rolled to a traditional IRA, thus a non-taxable event.  The contributions were directly rolled to a Roth IRA, also a non-taxable event since those were 401(k) post-tax contributions.  The entire transaction was reported on one 1099-R.  The combined amount of contributions and earnings was reported in box 1.  No taxable amount was reported in box 2a and no boxes are checked in 2b.  The after-tax contribution amount rolled to the Roth IRA was reported in box 5.  The distribution code is G.  IRA/SEP/SIMPLE is not checked.  Each transaction (the 401(k) to Roth IRA rollover, and the 401(k) to TIRA rollover) was reported on separate forms 5498.   Does the amount in 1099-R box 5 (401(k) after-tax contributions rolled directly to a Roth IRA) need to be reported on form 8606 so that I report the basis?  I don’t think it does, but am seeking confirmation.

[DavidD66]

No, you don't need to report the amount in Box 5 on Form 8606.  You do need to track the basis yourself, in case you take a distribution before age 59 1/2.  Your basis can be withdrawn tax free and without penalty, as long as your Roth account has been open for at least five years.  The IRS does not track your basis, you are responsible for that.

[robs462]

Thanks for the quick reply and confirmation regarding Form 8606.  As an aside, I thought the purpose of Form 8606, which is furnished to the IRS, was at least in part to track (and report to the IRS) the basis so that you are not taxed twice upon any withdrawal.  Is that not true?

[dmertz · Accepted solution]

To accommodate TurboTax's limitations in regard to handling a split rollover, the Form 1099-R must be split into two, one for the portion rolled over to the Roth IRA and the other fro the portion rolled over to the traditional IRA.  The one for the portion rolled over to the Roth IRA will have the amount from box 5 in boxes 1 and 5 and the one for the portion rolled over to the traditional IRA will have in box 1 the original box 1 amount minus the box 5 amount.

As DavidD66 said, nothing about this goes on Form 8606.  When entering the split form for the portion rolled over to the Roth IRA and indicating that it was rolled over to a Roth IRA, TurboTax will add this amount to your Roth IRA contribution basis shown on the IRA Information Worksheet.  Form the split form for the portion rolled over to the traditional IRA, just answer No to both questions that ask if it was rolled over to some type of Roth account.

[robs462]

Thanks so much for the further explanation and clarification.  Appreciate both of your responses.