I did a rollover from my pension to a Roth IRA but forgot to take taxes out

[dwade3435]

Hi, 

I hope someone can help me here. I did a direct rollover from my defined pension plan but forgot to give the instruction to withhold taxes before going into a Roth IRA account. I got the 1099-R form with only the gross distribution amount and no taxable amount. How do I pay the taxes? Do I just say the taxable amount is also the same for the gross distribution? They are not going to give me a updated 1099-R with taxable amount on it since it was done last year in March. Any feedback is much appreciated.

Thanks,

Wade

[AmyC]

If your 1099-R box 7 has code H, that is a direct rollover and there is no taxable income. The code H is for after-tax employee contributions to a ROTH account.

If your pension was pre-tax dollars, then the taxable amount may be blank and say amount not determined as you could have rolled it into a Rollover IRA instead. The program asks you what you did with the money to determine the taxable amount. If the taxable amount is in fact the gross distribution, you can put that in for the taxable amount or leave it blank and go through the program questions that follow.

[dwade3435]

Thanks Amy. The distribution code is G and the taxable amount is 0. Total Distribution is marked (which is not true because there is still money left over that I couldn't take out, and it will be annuity when I retire). I called the pension broker and they said I didn't provide instructions to withhold taxes when I filled out the rollover forms. My understanding is that I told them I am rolling over to a Roth IRA so the money needs to be taxed before going into the Roth IRA account. Since the full amount was rolled over, I now should be paying the taxes (federal and state) so when I reach my retirement age and I won't need to pay any taxes. 

So now I have the 1099-R with the full gross distribution amount and 0 taxable amount. Can I just put the taxable amount myself and pay the taxes? Will there be any issue later if I don't have an updated 1099-R form showing that? 

[ErnieS0]

TurboTax recommends that you get a corrected 1099-R from your pension broker if your form has "$0" in Box 2a and "G" in Box 7. If your pension broker will not do that, you can change Box 2a.

If you enter your form as down and tell TurboTax you rolled the amount amount a Roth, TurboTax will assume your paid tax on the entire amount and will show the rollover as nontaxable.

If that's not true, change Box 2a to match Box 1. TurboTax will make the amount in 2a the taxable amount.

Check your Form 5498 to what is being reported in Box 3 Roth Conversion amount. This form also goes to the IRS.

[dwade3435]

Hi, thank you for your advice.

The issuer refused to provide a new 1099-R. They said the rollover was done correctly as it was from one pension plan to another. There was suppose no taxes involved. So now I will just make the $50k as taxable income myself and pay the federal and state taxes this year. Hopefully there will not be any issue later or when I reach my retirement age to take the money out from the Roth IRA account. 

[dkoskamp]

We are in a similar situation where taxes were not taken out in converting my wife's small pension to a Roth IRA in 2022.  I understand from this thread that when entering the 1099R from the pension institution that in order to get the correct taxes paid that we need to "change Box 2a to match Box 1 [so that] TurboTax will make the amount in 2a the taxable amount."   That part makes sense so that we pay taxes on the pension distribution (let's call that pension distribution amount "$X") .  

As part of the process we have also received a 1099R from the institution where the Roth IRA account is and where the pension money was transferred directly to.  My wife did a 2022 backdoor Roth contribution of $6000 to the same account in 2022, so this 1099R shows the box 1 gross distribution total as the $6000 plus the $X from the pension.  It also shows this $6000+$X amount in box 2a (taxable amount) as well as having box 2b checked (taxable amount not determined) and also the total distribution box checked.   The distribution code is "2" with IRA/SEP/SIMPLE checked.  My question is how I should enter in this 1099R from the Roth IRA account institution into Turbo Tax?  Do I need to split up the $6000 and $X amounts into separate 1099R entries so Turbotax does the correct thing for filing taxes, or just keep them combined and report it as a conversion to Roth IRA as described at https://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html ?

Appreciate any help!

[BrittanyS]

You can enter the 1099-R as one 1099-R, and in addition to changing Box 2a to match Box 1, follow these steps to enter the Backdoor Roth conversion:

1. Select Federal from the menu, then Deductions & Credits
2. Locate the Retirement and Investments section and select Show more
3. Select Start or Revisit next to Traditional and Roth IRA Contributions
4. Check the Traditional IRA box and select Continue
5. Answer No to the question, Is This a Repayment of a Retirement Distribution?
6. On the screen, Tell Us How Much You Contributed, enter the amount contributed and select Continue
7. Answer No on the screen Did You Change Your Mind?, then answer the questions on the following screens
8. When you reach the Choose Not to Deduct IRA Contributions screen, select Yes, make part of my IRA contribution nondeductible, enter the amount you contributed, then select Continue 

@dkoskamp 

[dkoskamp]

Okay, interesting, so you are suggesting I combine the two 1099Rs from the two separate institutions and enter the information as a single digital 1099R form in Turbotax, correct? If I did that which institution do I say the "new" 1099R was from as at that point the combined 1099R is now a hybrid or mixture of information from the original two sources.  In that case I'm also not sure what would need to be marked for box 7 as the original pension institution 1099R listed "G" whereas the Roth-IRA institution listed "2".

For sake of clarifying this example, let's say the $X from the pension institution was $1000. In that case the form I received from the Roth IRA institution reported $7000 for the box 1 gross distribution total. This is because the $7000 is for the 2022 $6000 backdoor Roth contribution + $1000 from converting the pension to Roth IRA.

For entering this new combined "hybrid" 1099R into Turbotax I would list:
$7000 for box 1 - gross distribution
$1000 for box 2 - taxable amount
Box 2b - Check the "total distribution" box, but do not check "Taxable amount not determined" as we actually know box 2a of $1000 is valid
Box 7 - Mark the "Distribution code(s)" as "G,2" to include the codes from the original two 1099R forms (or something else here, I'm not sure???)
IRA/SEP/SIMPLE would also be checked or selected.

Or maybe this is not what you are suggesting, and I still need to somehow enter in two 1099Rs to cover reporting of the non-taxable $6000 as well as the taxable $1000 conversion to Roth IRA.

I hope these questions are clear. Just trying to make sense of how to capture and report all of the information from the two physical 1099Rs, to pay the required tax on the $1000 , and accurately report the conversion of the $6000+$1000 to a Roth IRA.

[DanaB27]

No, you will enter the two Form 1099-R separately. 

For the $6,000 backdoor Roth (assuming you made the nondeductible traditional IRA contribution in 2022) please follow the steps below.

To enter the nondeductible contribution to the traditional IRA:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the 1099-R conversion: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" screen click "Continue"
6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

For the pension to Roth IRA ($1,000), you will enter the Form and indicate in the follow-up questions that this was moved into a Roth IRA. 

If box 2a taxable amount has wrongly $0 then you will either have to ask the issuer if they will give you a correct Form 1099-R or you will have to make changes to your Form 1099-R to get TurboTax to report the rollover as taxable. Enter a zero in box 5 and indicate in the follow-up questions that the distribution was rolled over to a Roth IRA. Please see this excellent discussion from dmertz for additional information.

[dkoskamp]

Okay, I think I am almost there, but did run until an issue after entering the two 1099R forms as suggested (as best as I could follow).  I appreciate your help and patience as I work through this!  As a quick review I have two 1099Rs.

1) Pension institution 1099R: $1000 distribution for the pension paid directly to the Roth IRA institution (the Roth IRA institution converted the money from a Traditional IRA to the Roth IRA).  The $1000 is the money I need to pay taxes on somewhere in the process.

box 1: $1000

box2a: <blank>

box 2b Taxable amount not determined <blank or not checked>

box 2b Total distribution box - checked.  

Box 7 distribution code “G" with IRA/SEP/SIMPLE not checked.

2) Roth IRA institution 1099R– $7000 distribution

box 1: $7000 (which includes 2022 $6000 backdoor contribution, as well as the $1000 which came from the pension company and was converted to the Roth)

box2a: $7000

box 2b Taxable amount not determined - checked 

box 2b Total distribution box - checked.  

Box 7 distribution code ”2" with IRA/SEP/SIMPLE checked.

I entered in the non-deductible traditional IRA contribution of $6000 as stated.  When I then entered the $7000 1099R , I see that Turbotax listed 1040 box 4a (IRA distributions) as $7000 and then 1040 box 4b (taxable amount) as $1000.  However, when I then entered the pension's $1000 1099R with distribution code “G" per the directions, Turbotax filled in 1040 box 5b with “ROLLOVER” and then filled in 1040 box 5b “taxable amount” as $1000.  Therefore with 1040 box 4b) and 1040 5b) both filled in with $1000, I now would be paying tax on the $1000 twice.  I saw my projected tax refund get reduced for each 1099R entered so I can could tell I was getting double taxed.

I’m thinking the way I entered in the $7000 1099R may need to be tweaked?  Perhaps I should have only entered in Box 1 and box 2a there as $6000 (or perhaps box 1 as $7000 and box 2a as $1000??) , and then let Turbotax handle the correct reporting of the taxable $1000 from the entry of the $1000 1099R?  Or any other suggestion how to fix or avoid this double taxation of the $1000?

Thanks!!

[DanaB27]

First please make sure you enter the Form 1099-R as shown on the Form 1099-R (except enter $0 in box 5 as mentioned above if these $1,000 were moved directly from pension (401k?) to Roth IRA).

But it seems we need to clarify a few things:

It seems that the pension might be moved first to the traditional IRA (then the Form 1099-R mentioned in 1 would be correct and you would not need to enter the $0 in box 5). Then you moved the $6,000 nondeductible traditional IRA contribution plus the $1,000 (that came from the pension) to the Roth IRA. Is this correct?

If yes, then you will enter Form 1099-R for the $1,000 as shown on the form. This part is a nontaxable rollover (Pension to traditional IRA).

Then you will have to enter the nondeductible contribution and the Roth conversion with the steps below.

To enter the nondeductible contribution to the traditional IRA:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed $6,000
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
10. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the 1099-R conversion: 

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount of $7,000 next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
12. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

Once you have completed this (assuming all of your traditional/SEP/ SIMPLE are empty after the conversion) you will have the $1,000 as a taxable amount in line 4b of Form 1040.

@dkoskamp

[dkoskamp]

"It seems that the pension might be moved first to the traditional IRA (then the Form 1099-R mentioned in 1 would be correct and you would not need to enter the $0 in box 5). Then you moved the $6,000 nondeductible traditional IRA contribution plus the $1,000 (that came from the pension) to the Roth IRA. Is this correct?"

Yes, this is correct.  Sorry it hasn't entirely been clear along the way.  It sounds like I should delete and redo the $1000 1099R entry into Turbotax being sure to NOT enter $0 in box 5.  I will work on this update soon, thanks!

[LilyCat]

I am in a very similar situation to the last, most recent person who replied to this thread. I have a pension from my last company that was put in a traditional IRA and then converted to a Roth IRA. When my last company paid me out for my pension, on the 1099-R forum they have the pension money they gave me listed as a gross distribution and a taxable amount (boxes 1 and 2a are filled out).  They also checked off total distribution. I also did a backdoor of $6K by putting it in my traditional and then converting to a Roth IRA. The 1099-R forum from my brokerage institution lists the $6K + the amount my last company paid me out for my pension. Sections 1 and 2a are filled out with the total amount of $6K + the amount my last company paid me out for my pension. They checked off total distribution and taxable amount not determined. Do I put in both the 1099-R from the brokerage as well as the institution that paid the pension money to me? I just want to make sure it's not double counting the pension amount that was rolled over since both forums have that pension $$ listed under taxable amount. Once I added the second 1099-R from my last company that paid out my pension instead of just listing the brokerage 1099-R the amount I owed in taxes went up substantially.

[DavidD66]

You need to report both Forms 1099-R.  If the pension was a direct rollover to the IRA it should have a code G in Box 7 or the 1099-R.  That would automatically be reflected in the program as a non-taxable rollover.  If instead, the money was paid out to you, then you will need to answer the questions after entering your 1099-R.  After you enter(ed) the 1099-R, there is a page that asks "What Did You Do With The Money From [Retirement Plan]"? 

Be sure you indicate first that you "...moved the money to another retirement account (or returned it to the same retirement account)."  and the you "rolled over all of this money to another IRA or other retirement account (or returned it to the same account)."

[LilyCat]

The pension money was paid out to me. Listing the two 1099-Rs results in my income in row 9 of my 1040 being more than the money I received for the year. It’s more than the money I received by the amount of the pension. The pension amount is listed twice in row 4B and 5b. Doesn’t that mean I’m getting taxed on the amount twice by listing the two 1099-Rs that’s referring to the same income twice? Please let me know if I’m missing something