401K Partial Distributions to Traditional IRA and Roth IRA

[syoung123]

Hello, I partially converted my 401K to a traditional IRA in 2023, and the 401K has a small amount of after-tax dollars.  I over-contributed to the 401K limit through payroll deductions, and my employer put the over-contributions into an after-tax account.  My total 401K was about $250,000 with $600 in after-tax dollars.  When I did the partial 401K conversion to a traditional IRA for $200,000, my 401K administrator used % allocation to withdraw the dollars, so I wounded up having pre-tax of $199,600 and after-tax of $400 going into the traditional IRA.  I discussed with the 401K administrator in Feb 2024, that the $400 after-tax 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.  They told me their tax department would issue a replacement 1099R to show $199,600 went into a traditional IRA and $400 (after-tax dollars) went into a Roth IRA, and both conversions/distributions to traditional IRA and Roth IRA are non-taxable events.  It has been over 2 weeks and I have not seen the replacement 1099R, and I am curious in knowing what the 1099R(s) would look like.  I saw some older posts saying their 401K administrator issued the 1099R with incorrect code for this kind of partial conversions, and TurboTax showed input error when they tried to input the 1099R since the code was incorrect, and their 401K administrator said the 1099R code was correct and refused to change the code.  So I just want to understand this better.  My original 1099R (partial 401K distribution to traditional IRA) looks like this:

Original 1099R - partial 401K distribution to a traditional IRA

Box 1 gross distribution - $200,000 (out of total amount $250M in 401K)

Box 2a taxable amount - blank

Box 5 employee contributions (portion of my after-tax contribution?) - $400

Box 7 distribution code - G with IRA/SEP box unchecked

What would the new 1099R look like?  The 401K admin. representative that I spoke with thinks that I would get only one 1099R, but I am not sure how just one 1099R would show $199,600 went into traditional IRA and $400 went into Roth with the proper code(s), and how I would input the 1099R into TurboTax.  Would I get one 1099R or two 1099Rs?  If I should get two 1099Rs, would:

-  One 1099R show $199,600 to traditional IRA with code G (IRA/SEP box unchecked) to indicate it is a direct rollover and non-taxable?

-  Another 1099R show $400 (after-tax dollars) to Roth IRA with code (?) to indicate it is a non-taxable event?

-  Would I need to fill out a Form 8606 (Non-Deductible IRA)?  And if so, how should I fill it out?

Thank you for your help in advance.

[CatinaT1]

Were you able to resolve your issue here or are you still needing guidance? 

Make sure you have ran all updates. 

If using TurboTax Online: Clear your cache and cookies. See this FAQ, for your particular browser.

If using TurboTax Desktop: Please see this FAQ.

If you still are not able to solve this, please call TurboTax Customer service.  Here is a link:  Turbo Tax Customer Service 

[syoung123]

I have not received any reply or input yet.  I still have the question per my post.  

[AmyC]

Your 1099-R for the traditional rollover will have code G for the nontaxable rollover. Probably, your 1099-R will have code H for the rollover into a ROTH that is non-taxed. Once you get the forms, we can revisit what needs to be done.

The 8606 is filed every year that you have a nondeductible basis in an IRA at the end of the year, on 12/31.

[syoung123]

Thank you for your reply.  Code H is from "designated Roth account to Roth IRA".  Mine  was 401k after tax contribution, because my employer did not stop my payroll deduction after I reached the contribution limit.  Is it the same as "designated Roth account"?

also, I don't think I would have any "non deductible IRA", since it was "401k after tax contribution".  I am kind of confused about the different description terms.  How would I fill out the 8606?

[AmyC]

I don't know your company's  procedure and I don't know what they will send. I don't think you need an 8606. Here is my thinking:

When you made contributions to your 401k that were over the limit, you must have noticed your paycheck looked different at the end of the year because you had to pay tax on the excess contributions. In your 401k, you have pre-taxed dollars for most of it and already taxed dollars for the rest. The pre-tax dollars are easy and they roll into the traditional IRA. It is being rolled into a traditional IRA so usually we see code G.

The already taxed dollars form the basis of your 401k. Those were dollars that were not deductible, you paid taxes on them.  The basis of your 401k is what is being rolled into a ROTH.  If all of the 401k money were rolled into the traditional IRA, then your after tax dollars would be your non-deductible IRA portion that goes on 8606. That is the portion that rolls tax free into the ROTH.  

The 8606 is if you have a basis in a traditional IRA. If all of your basis was rolled into ROTH, then you have no 8606 to fill out.

There are many options for what they could mark this but to show it is already taxed dollars being transferred, they need to pick a code. I have no idea what they will pick. When you look at the chart with the possibilities, they will decide. You can see the option with table 1 here. I used "probably" because it does get used but there are certainly a table full of options!

Once you have both forms, then we can help you get them entered and make sure your tax forms are correct.

[syoung123]

Hello, I spoke with a customer service representative for the 401K administrator.  After some research, she told me there was no need for them to issue a new 1099R because the original 1099R is still correct with the pre-tax $ rolled over to a traditional IRA and after-tax 401K $ rolled over to a Roth IRA, and distribution code G on box 7.  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 2022 and 2023).  So I have to use form 8606 to report this traditional IRA to Roth conversion.  Without the amounts related to the 401K partial distributions in question, the 8606 shows no data on page 1, $40,000 on line 16 and 18 of page 2, and also $40,000 on line 4a and 4b (taxable IRA) of 1040.

For the 1099R data on the 401K partial distributions that was initially sent to me:

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 to input this 1099R, the input screen asks

“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”

TurboxTax went back to the “Your 1099R Entries” screen that shows a listing of the 1099Rs, now it appeared to show I owed tax on the entire $200,000 (even when I input code G as shown on the 1099R).  It doesn’t provide input screen for 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” (if clicked “no”, the input for this section ended)

“total basis as of 12-31-2022” – I clicked “no” since my 8606 for 2022 was blank on page 1, the only amount was 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, which $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?