TurboTax won't populate Form 8606 Line 24 (Basis for rollover)

[Astro_Patriot]

In 2024 I did a rollover of after-tax contributions from my 401K to a new Roth IRA.  Several months later I took a distribution from this Roth IRA for an amount that was about 25% of the rolled over amount.  I got two 1099-R forms for 2024.  One was for the rollover of after-tax 401K contributions which show on Line 5 in the 1099-R.  The 2nd 1099-R showed the Roth IRA distribution with a Box 7 code of T.

TurboTax has my 2024 Roth IRA distribution as a taxable amount.  It will not populate Form 8606 Line 24 with what I believe to be the basis from my rollover.  So this basis does NOT get subtracted from the distribution amount in Part III of Form 8606.

I am convinced by reading IRS docs, that my distribution, although non-qualified, is NOT taxable.  Is there a bug in TurboTax?

[dmertz]

What is the code in box 7 of the Form 1099-R from the 401(k)?

If the amount in box 1 is greater than the amount in box 5, is the difference shown in box 2a?

When entering this Form 1099-R into TurboTax, did you explicitly indicate that this distribution was rolled over to a Roth IRA (and not to a designated Roth account in the 401(k)?

[Astro_Patriot]

The code in Box 7 for the rollover 1099-R is G.  The amount in Box 1 is much larger than Box 5.  This is because later in 2024, I rolled all of my pre-tax 401K contributions into a new Traditional IRA.  Box 2a has a value of 0.

If I answer 'yes' to the TurboTax question:

Did you move this money from a 401(k) to a Roth 401(k)?"

then later TurboTax asks me:

Did you make after-tax contributions to a 401(k), 403(b), or 457(b) plan?

to which I answer yes, and give the full after-tax rollover amount.

But neither Form 8606 Line 22 nor Line 24 get populated by TurboTax.

If I don't answer yes to the first question above, then the rollover amount is never asked about by TurboTax.

[Astro_Patriot]

Also,  to a later TurboTax statement of:

Enter Prior Year Roth IRA Contributions

if I enter my after-tax roll over amount  to the prompt:  Roth IRA Contributions prior to 2024

then my non-qualified distribution becomes not taxable because TurboTax then populates Form 8606 Line 22 which gets subtracted from my distribution.

But I don't think this is the correct thing to do in my case, since I didn't have a Roth IRA until 2024.  But I did make several years of after-tax contributions to my old 401K.

[dmertz]

Since you said that you moved funds to the new Roth account, then took a distribution from this account and received a code-T Form 1099-R for this distribution,  you moved funds to a Roth IRA, not to a Roth 401(k).  A 401(k) is not an IRA and an IRA is not a 401(k).  You must answer No when asked if you moved funds to a Roth 401(k) and on the next page answer Yes when asked if the funds were moved to a Roth IRA.  Doing so will cause TurboTax to add the the amount from box 5 of the code-G From 1099-R to your basis in Roth IRA contributions.

[Astro_Patriot]

Thanks for your reply.

When I do what you suggest and answer NO instead of Yes to the question:

Did you move this money from a 401(k) to a Roth 401(k)?"

and answer Yes to the question of having moved the money to a Roth IRA,

Then TurboTax takes the amount in my Code 'G' 1099-R Box 1 and puts that in Form 8606 Line 24.  This makes my Roth IRA non-qualified distribution NOT taxable.  BUT, that Box 1 amount less Box 5 ends up as a taxable amount on Form 1040 Line 5b.  TurboTax acts like the Box 1 amount was converted to a Roth IRA which is NOT the case.  My Box 1 amount less the Box 5 amount was rolled over to a traditional IRA.

So this isn't working correctly for me either.

[dmertz · Accepted solution]

I see.  When a code-G From 1099-R reports distributions where some when to a traditional IRA and some went to a Roth IRA, limitations in TurboTax require you to split the Form 1099-R into two, one for the portion rolled over to the Roth IRA (the box 5 amount from the original entered in boxes 1 and 5) and the other for the portion rolled over to the traditional IRA (the box 1 amount minus the box 5 amount in box 1 and zeros in boxes 2a and 5).

[Astro_Patriot · Accepted solution]

OK.  I'll try splitting the Code G 1099-R into TWO separate 1099-Rs for TurboTax as you suggest.  But if I do this, then when I file, will the IRS be satisfied with this split since they'll see TWO 1099-Rs from my TurboTax filing whereas they only got ONE from my old 401K provider?

Could TurboTax be 'fixed' to more properly handle this situation?

[Astro_Patriot]

OK.  The split does produce the desired result whereby Form 8606 Line 24 is finally properly populated and my 2024 Roth IRA distribution becomes NOT taxable due to the basis subtraction.

My only concern is that when I file my return via TurboTax, it will show my original single 401K Code G rollover 1099-R as two separate 1099-Rs.  Once again, would you expect this to be an issue with the IRS?

Thanks much.

[dmertz · Accepted solution]

The IRS never sees that you split the form. The IRS only sees the result on Form 1040 lines 5a and 5b.

[Astro_Patriot]

Awesome.

Thanks again.

Your advice was many orders of magnitude better than what I got via several phone calls with TurboTax advisors.