ONE 1099-R for rollover from 401k to traditional IRA AND Roth IRA

[johnp317]

I rolled over my 401k mostly to a traditional IRA with a small amount to a Roth IRA.  I got ONE 1099-R that has the FULL amount in box 1 and the Roth amount in box 2.  Given that, how do I answer this question:

YES or NO because the answer is really BOTH?  It seems to make a very BIG difference in the taxes I need to pay.

[ThomasM125]

You need to make two Form 1099-R entries. On one entry, report the rollover of traditional funds to the traditional IRA. On the other one, report the rollover of the traditional funds to the Roth IRA. That way you can answer the questions separately. Just make sure the totals you enter agree with what is on the Form 1099-R.

When you are done, you can look at your Form 1040 on line 4b to insure that the correct amount of distribution is showing as taxable: 

1. Choose Tax Tools from your left menu bar in TurboTax Online
2. Choose Tools
3. Choose View Tax Summary
4. See the Preview my 1040 option in the left menu bar and click on it
5. Choose the Back option in the left menu bar when you are done

[johnp317]

Thank you for answering, but I get the exact same result by merely entering the 1099-R exactly as I received it  (with full amount in box 1 and roth amount in box 2) and answering YES to this question.  Hence, I don't really see the point of splitting the ONE 1099-R I received into TWO 1099-R's in TurboTax.   Let me know if I'm missing something here.  

I think this is a confusing aspect of this interview question. The option of "both" in addition to "yes" and "no" would be much clearer and would absolutely be the choice I would have made because my 401k conversion did go to both a traditional IRA and a Roth IRA.

[VolvoGirl]

Did you try splitting it into 2 1099R?   Just try it.   That is the solution.  @dmertz 

[johnp317]

Yes, I did try and I got the EXACT same taxes due when splitting and answering the questions separately as I got not splitting and answering YES.  This is probably because the "Taxable amount not determined" checkbox is NOT checked so it knew to tax me only on the box 2 amount.  Of course, I didn't like the answer because my taxes went up (as compared to the "no" answer) but spliting vs not splitting were exactly the same.

[Opus 17]

The question no one has asked is,

Was this a rollover of pre-tax funds to a Roth IRA, or a rollover of after-tax funds to a Roth IRA?   It is uncommon but not impossible to have some after-tax funds in a regular (pre-tax) 401k.  In that case, the plan custodian must split the funds and rollover the pre-tax amount into a traditional IRA and the after-tax amounts into a Roth IRA.  

• For the 1099-R that reports pre-tax amounts rolled over to a traditional IRA, use code G in box 7.

• For the 1099-R that reports a rollover of an after-tax amount to a Roth IRA, use code H in box 7. 

However, if this was a rollover of pre-tax funds into a Roth IRA, that is a conversion, and is properly taxable, and use code G for both, and pay the tax.  

[johnp317]

100% of the 401k was pre-tax money so the small amount that went into the Roth IRA is taxable. The remainder went into a traditional Ira so it is not. The financial institution reported both the Roth conversion and the Ira rollover on the same 1099-R.

[Opus 17]

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@johnp317 wrote:

100% of the 401k was pre-tax money so the small amount that went into the Roth IRA is taxable. The remainder went into a traditional Ira so it is not. The financial institution reported both the Roth conversion and the Ira rollover on the same 1099-R.

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Fine.  So the two 1099-R solution will work, both with code G.

I have not tested code G myself, but with early IRA withdrawals (code 1), the program asks what you did with the money, and the choices include rollover and Roth conversion.  But then there is a followup question, so it is possible to specify that you did a rollover of $X and a conversion of $Y and only the conversion is taxed.  Maybe you have just not gone far enough in the interview. 

If the only options really are 100% rollover or 100% conversion, then enter two imaginary 1099-Rs that add up to one real one. 

[johnp317]

@Opus 17 Thanks for this great information!  The code on my 1099-R is code G but I tried changing it to code 1 even though it's not an early withdrawal since I'm over 60.  I do see the questions it's asking now and how it allows me to split it to part Roth conversion and part standard IRA rollover.  The end result is still exactly the same in terms of the tax due, however.    

INTUIT, PLEASE TAKE NOTE:

This UI to be able to split the between Roth Conversion and traditional IRA rollover should be available for at least code G as well (and maybe others).   The current UI gets the taxes wrong if you pick "Yes" when the G coded 1099-R is split between roth and traditional.  The UI path should be more like code 1 so that you can put the split in and be taxed properly.  I can easily see people in this scenario picking the wrong choice and getting incorrect tax computations.

I also noticed that TT doesn't seem to remember when you pick Yes.  For example, If I pick Yes and go through the wizard a 2nd time, it defaults it to No.  I need to remember that I picked Yes and set it to Yes again otherwise going through the wizard that 2nd time without seemingly making any changes actually does change my Yes to a No.