401K partial rollover to ROTH with 1099-R indicating $0 in block 2A (Taxable Amount)

[K-Dog]

I'm not sure how to enter this into Turbotax. The 1099-R from my source 401K correctly indicates $50K in block 1, has 0$ in Block 2a, but NO check in box 2b. It also shows no State distribution amount. There was no tax withholding by the 401K source (I made separate Federal & State estimated tax payments for that quarter). It has the correct distribution code "G" in block 7 for the rollover. I did not see a place later in Turbotax to create the new (taxable) Roth or indicate estimated taxes paid on the amounts.

I can enter the estimated tax payments, but Turbotax doesn't appear to take the 50K as a taxable income (wants to give me the tax prepayment as part of a large federal refund).

What am I missing?

[dmertz · Accepted solution]

Since you indicate that you expect the part rolled over to the Roth IRA to be taxable, I assume that there is nothing in box 5 of this Form 1099-R.  If there is nothing in box 5, the details of this Form 1099-R imply that you instructed the plan to do a direct rollover of the entire amount to a traditional IRA but somehow you diverted some of the funds to a Roth IRA instead.  (Either that or the plan issued a Form 1099-R with an incorrect taxable amount in box 2a.)  This means that the Form 1099-R does not reflect the rollovers that actually occurred.

Whether or not there is anything in box 5, to accommodate TurboTax you'll need to split the Form 1099-R into two, one for the portion rolled over to the traditional IRA and another for the portion rolled over to the Roth IRA.  For the portion rolled over to the Roth IRA you'll need to put the taxable amount in box 2a; with a zero in box 2a TurboTax will treat the portion rolled over to the Roth IRA as nontaxable.  Because the split Forms 1099-R will not sum to the total in box 2a of the original, these probably should be done as substitute Forms 1099-R (Forms 4852).

[K-Dog]

Thank You for your rapid reply.

In re-reading my original post, I realize I confused people with my wording. I rolled over PART ($50K) of my 401k, but the ENTIRE roll-over amount ($50K) was rolled into a ROTH with another money manager, so the entire portion would be taxable. I believe the answer is the same, the entire amount is taxable by both Federal and State, and the 1099-R I received is in error. When I enter it into Turbotax like this, the end results appear as I would expect them.  I will seek to get a corrected 1099-R.

[dmertz]

Yes, my reply is essentially the same.  The Form 1099-R reports a nontaxable rollover to a traditional IRA, but that's ultimately not what happened.  If you requested that the 401(k) make the rollover to a Roth IRA, they have  made the error in reporting $0 taxable (absent any after-tax amount in box 5 of the Form 1099-R).  If the request you made did not specify a rollover to a Roth IRA, it's not their error and they are unlikely to change the Form 1099-R that they originally issued.

[K-Dog]

To properly end this discussion, let me explain what I discovered ACTUALLY happened. My current money manager had my 401K source move the $50K to them as a direct 401K to 401K transfer. This is the reason there was no other distribution or tax information on the Source 1099-R. My current money manager then did the 401K to ROTH conversion internally, and generated another 1099-R from them properly indicating the $50K being taxable. However, they still left the box 16 (State Distribution) blank on their 1099-R (which I still think should have been populated but that's a separate issue).

I needed to enter BOTH of these 1099-R's into Turbotax to show the source of the funds (initial transfer) and the secondary ROTH conversion. When I entered the ROTH conversion 1099-R into Turbotax (using Step-By-Step), it automatically populated the State Distribution on the next screen with the $50K for state taxing purposes. (I did not "zero" that block in Turbotax to match the received 1099-R.)  I believe this is the correct entry, and the resulting tax amounts come out to about what I expected.

Thanks again for your patience and help.    

[jlg8315]

I have a similar situation where a small part of 401k was rolled to a Roth.  1099-R shows total distribution amount and the Roth Conversion amount in 2a.  I input that into TT exactly, yet the taxable amount does not show in the final return.  I suppose the answer is the same, though it seems odd that the taxable amount when input is not calculated in TT at both state and federal level.

[K-Dog]

Heads-Up one other issue I had with my ROTH conversion in Turbotax that you may want to watch out for.

I did my conversion in Q3 last year sending in large pre-payments to both Federal & State in Q3, and even though I have a refund coming, it still calculated that I had a penalty for "under-payment". Federal and TT assume equal tax pre-payments throughout the year based on your YEAR-END total tax due, so it calculates (erroneously) that I have under-payment penalties for Q1 & Q2. 

I understand (from the link at the end of this post) that "I can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty." (reference form 2210, i.e. posting pre-payments withheld or made Qtr-by-qtr). I haven't done this yet - I just figured out what was happening.

https://ttlc.intuit.com/community/retirement/discussion/this-year-turbotax-says-i-owe-a-penalty-tax-...