Hello - I transferred/converted $200,000 of the $250,000 total amount from my 401K to a rollover traditional IRA. The conversion is a non-taxable event. The 401K plan administrator, which also holds my rollover traditional IRA, allocated a % of the each of my 401K holding categories (i.e., before tax and after-tax contributions) to make up the $200,000 transfer. About $2,000 (out of the $200,000 conversion) were "after-tax amounts" in my 401K. Of this $2,000, about $400 was contributed by me initially (with after-tax money), and $1,600 were “investment gains” on the $400 over the years.
Total 401K - $250,000
Transfer from 401K to rollover traditional IRA - $200,000
“After Tax” portion in the rollover - $2,000
My after-tax contributions - $400
Investment gains on my after-tax contributions - $1,600
On the 1099R form for this 401K conversion to traditional IRA event, Box 1 “gross distribution” shows $200,000, Box 2a “taxable amount” is blank, Box 5 “employee contributions/Designated Roth contributions….” shows $400, and Box 7 shows code “G” with IRA/SEP box unchecked.
My questions are:
- The after-tax amount of $400 in the rollover traditional IRA should not be taxed again since I already paid tax on it. However, this amount went into the rollover traditional IRA account, and for year 2023 the rollover is not a taxable event. Since this is not a taxable event for 2023 anyway, how would I need to distinguish the after-tax amount of $400 so it won’t be taxed in the future when I pull money out the rollover IRA or convert the money to Roth, which will be a taxable event? Otherwise, I’ll have to pay tax on the $400 that is “after-tax money”. Would I track it on Form 8606 or some other form?
- The “investment gains” on my after-tax contribution are also in the rollover traditional IRA. Since the gains were not “contributed directly by me”, they would be taxable when I pull the money out of the rollover traditional IRA in the future?
- When I used TurboTax Premier to input this 1099R as a test, I can’t find the $400 in Box 5 of 1099R shown anywhere on the TurboTax generated tax forms. The screen input that I used were:
Input - “Retirement Plan..”, “IRA..(1099R)”, “this money did not roll over to a designated Roth 401K”, “this money wasn’t roll over to a Roth IRA…”
Is there a form that is supposed to show that the $400 “after-tax money” will not be taxable? Did I input the 1099R incorrectly, or is there a bug in TurboTax that the software can’t address this? Or did my 401K administrator do the conversion incorrectly and the after-tax amount should have been converted to a Roth IRA instead of a traditional IRA?
Please advise. Thank you.
