Distribution from 1099-R not treated as taxable

[LAJ2]

I have a 1099-R with the gross distribution (box 1) equal to taxable amount (box 2a). Box 2b is also checked indicating that the taxable amount is not determined. Some of the money was rolled over and some was converted to a ROTH. The remaining amount is a normal taxable distribution. After entering the 1099-R and going through the questions after the form is filled out, TurboTax shows only the ROTH conversion as taxable. It refuses to treat the normal distribution as taxable. I've tried entering the amounts as one 1099-R and as separate 1099-R's. It doesn't make any difference. No matter what I do, the normal distribution is not treated as taxable. How can I correct this?

[DavidD66]

You have to enter your Form 1099-R as if it was two separate Forms 1099-R.  One for the rollover and one for the Roth Conversion.  The amount that was not rolled over should be included with the rollover.  For the Rollover, 

after entering the Form 1099-R information, indicate:  

• Delete the 1099-R entry for the normal distribution and Rollover.
• Enter Form 1099-R using the amounts applicable to the rollover and distribution.  After entering indicate:
• "I rolled over some or all of it to an IRA or other retirement account within the time limits (normally 60 days)". 
• On the next screen mark "No, I rolled over less than [$amount of distribution]
• In the box that appears, enter the amount you rolled over to another IRA
• On the Review your 1099-R info screen, click on "Continue" and provide any additional information as warranted

You should see the entire amount of the rollover and normal distribution on line 4a of Form 1040 and the taxable amount on line 4b.

[LAJ2]

Thank for the quick response. I see a slightly different set of options.  Here are the steps I went through after deleting the 1099-R and then starting a new 1099-R for the rollover and normal distribution:

•  Is this 1099-R for a contribution that your employer made to a Roth account? (No)

• Did you inherit the IRA? (No)

• What did you do with the money? 

  ○ I moved the money to another retirement account

• Of the available options, I then chose:

   ○ I did a combination of rolling over, converting, or cashing out the money

• I entered the amount rolled over, and left the amount converted to a Roth IRA blank.

• Did I put this money in an HSA (No)

• Was the withdrawal due to a qualified disaster (No)

Form 1040 line 4a now shows the total amount, but line 4b shows zero for the taxable amount. It should show the normal distribution.

Any suggestions?

[DanaB27]

In your original post you stated that you converted part of the funds to a Roth IRA but stated in the follow-up post "left the amount converted to a Roth IRA blank". You need to enter the amount converted in this field.

If you made a combination of rolling over, converting, and cashing the distribution then you will have to enter an amount in the roll over field and an amount in the converted field. Any amount left is assumed to be cashed out.

Note, conversions are taxable unless you made nondeductible contributions to your Traditional IRA and have basis reported on Form 8606.

[LAJ2]

Thanks for the response. I have tried what you suggested, but the normal distribution is still not treated as taxable.

Maybe the problem will make more sense if I use some made up numbers:

Lets say the gross distribution (box 1) and taxable amount (box 2a) on my 1099-R are both $1,000. Of that, $500 was rolled over, $300 was a ROTH conversion, and the remaining $200 was a normal distribution.  TurboTax allows me to designate the rollover and ROTH amounts.  TurboTax says it will assume the $200 is taxable because is it neither a rollover or ROTH, but it doesn't do that. It only shows the $300 ROTH as taxable. 

When manually filling out the 1099-R, the "Refund Amount" changes as soon as I click the IRA/SEP/SIMPLE box. Once that is done, the total $1,000 gross distribution is treated as not-taxable. After filling out the 1099-R, Turbo Tax will continue to treat it as non-taxable even if I click on the box that says I "did something else with it (cashed out, etc.)".  At that point all of it should be taxable. Any amount I designate as a ROTH conversion will be treated as taxable, but only that amount will be taxable.

I have tried importing the 1099-R, entering the amounts on one form, and as two 1099-R forms (per the TurboTax pop-up and DavidD66's advice). I have not overridden any entries. To see if maybe I have a corrupted file, I have deleted the 1099-R, saved the TurboTax file, rebooted, and tried again.  Still the same problem.

[ThomasM125]

You can make three separate entries. One for the rollover, one for the conversion and one as a normal distribution. As long as the gross distribution amount equals the total reported on your 1099-R form, you will be OK.

[LAJ2]

I finally figured it out.

• Go to View > Forms > 1040/1040SR Wks. 

• Right click on the taxable amount in line 4b and go to data source.

• Line 2 Amount rolled over was incorrect. When I manually entered the correct amount, everything worked. 

This was an insanely frustrating problem.