Hello, I converted part of a 401K to a traditional IRA in 2023, and the 401K has a small amount of after-tax dollars. I over-contributed to the 401K maximum limit through payroll deductions, and my employer put the over-contributions into an after-tax account instead of stopping the contributions at the limit. The total 401K was about $250,000 with $600 in after-tax dollars. I confirmed with the 401K administrator that the $600 are in an after-tax account, not a Roth 401K.
The partial 401 conversion was about $200,000. The 401K administrator used % allocation to withdraw the dollars, so I wounded up having pre-tax of $199,600 and after-tax of $400 in the traditional IRA. I discussed with the 401K administrator in Feb 2024 that the after-tax $400 should have gone into a Roth IRA as after-tax conversion, and they were able to move the $400 into a Roth IRA and dated the conversion back to 2023. Initially, they told me their tax department would issue a replacement 1099R to show $199,600 went into the traditional IRA and $400 (after-tax dollars) went into the Roth IRA, and both conversions to traditional IRA and Roth IRA are non-taxable events. Since then, I spoke with the 401K administrator again and they told me there was no need for them to issue a new 1099R because the original 1099R is still correct, even when they made the change to split the 401K $ of $200,000 to rollover pre-tax of $196,400 to a traditional IRA and after-tax of $400 to a Roth IRA, and since both were direct overs with distribution code G on box 7.
As a side note, I have another traditional IRA (separate from the one above) which I rolled over some money into another Roth IRA in 2022 and 2023 (in 2023 I rolled over $40,000 that was taxable, with $90,000 total for the last two years). So I have to use form 8606 to report this traditional IRA to Roth conversion. Assuming for the 401K partial conversion event above, there should be no input needed for the form 8606 since both conversions to traditional IRA and Roth IRA were direct rollovers and they were non-taxable events? And my form 8606 would not have any dollars on page 1, and page 2 would show $40,000 on line 16 and 18, and form 1040 $40,000 line 4a and 4b (taxable) would also show $40,000?
My original 1099R (partial 401K distribution to traditional IRA) looks like this:
Box 1 gross distribution - $200,000 (out of total amount $250M in 401K)
Box 2a taxable amount – blank; box 2b taxable amount not determined unchecked
Box 5 employee contributions (portion of my after-tax contribution?) - $400
Box 7 distribution code - G with IRA/SEP box unchecked
When I used TurboTax (Window desktop, Premier version) to input this 1099R, the input screens asked:
“Was this money rolled over to a Roth IRA?” – I selected “Yes”, because $400 of the $200,000 went into a Roth IRA.
“Did you make any after-tax contributions to your 401K plan?” – I selected “Yes”, since $400 was after-tax dollars from over-contribution to the 401K through payroll deduction
“after-tax contribution to 401K” box on the next screen – shows $400 (from the screen that I first typed in the 1099R data?)
Then I checked “no” for public safety officer, and then checked the button for “other qualified IRA distributions”
TurboTax went back to the “Your 1099R Entries” screen that shows a listing of the 1099Rs, and it showed I owed tax on the entire $200,000 (I input distribution code G for this 1099R). It did not give an input screen to let me to further indicate $199,600 went into traditional IRA (not taxable), and $400 was after-tax that went into Roth (also not taxable). So I clicked “continued”:
“Any non-deductible contributions to IRA?” – I clicked “yes” (when I clicked “no”, TurboTax ended the input for this section)
“total basis as of 12-31-2022” – I clicked “no” since my 8606 for 2022 was blank on page 1, the only $ were shown on line 16 and 18 for Roth conversion.
“value on traditional IRA as of 12-31-2023” – I put in $600,000, which were the total values of this 401K conversion ($200,000 minus the $400 Roth) plus the other traditional IRA that I have.
TurboTax ended the input section and took me back to the “income” section, and it shows I owed tax on the entire $200,000. However, there should not be any taxes for this 401K conversion sine $199,600 went into traditional IRA (non-tax) and $400 went into Roth (non-tax because $400 was after-tax 401K contribution).
What did I input incorrectly, and how should I input this 1099R to TurboTax?
Thank you for your help to answer my questions in advance.
