Basis for Roth 401(k) Rollover to Roth IRA

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NOVACPA
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Joined: Mon Apr 28, 2014 4:13 pm

Basis for Roth 401(k) Rollover to Roth IRA

Post by NOVACPA » Mon Feb 23, 2015 12:57 pm

I had a question on where I would be reporting the basis of a trustee-to-trustee Roth 401(k) rollover to Roth IRA.

In 2014, I changed jobs and rolled over my 401(k) from Vangaurd to Fidelity which had Roth money and pre-tax money. The pre-tax portion went into my 401(k). The Roth portion went into my Roth IRA.

I got the two 1099s from Vanguard and entered them into TurboTax. Dring the questionaire on the IRA contribution screens, it asked for my Roth IRA Basis. I entered the net contributions to my Roth IRA.

Should I have added the 401(k) money that has been rolled into the IRA? Or does this get entered on next year's taxes?

Alan S.
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Re: Basis for Roth 401(k) Rollover to Roth IRA

Post by Alan S. » Mon Feb 23, 2015 1:24 pm

The pre tax 401k direct rollover should not trigger IRA questions since you indicated the rollover went into your new 401k pre tax account. Is that correct?

The 1099R for your Roth 401k direct rollover to your Roth IRA should have an amount in Box 5. This amount will become part of your Roth IRA basis even if it is more than the amount rolled over. But I do not know if this question is asking about your prior Roth IRA basis before the rollover or just the amount added from the rollover itself. Would have to know more about exactly where you are in the program.

All of this reporting is for your 2014 return, although Ttax is also attempting to update the current status of your Roth IRA basis in case of future Roth IRA distributions.

I assume neither of these 1099R forms has any positive number in Box 2a.

Topic Author
NOVACPA
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Re: Basis for Roth 401(k) Rollover to Roth IRA

Post by NOVACPA » Mon Feb 23, 2015 3:56 pm

Alan S. wrote:The pre tax 401k direct rollover should not trigger IRA questions since you indicated the rollover went into your new 401k pre tax account. Is that correct?
Correct. It does not trigger IRA questions.
Alan S. wrote:The 1099R for your Roth 401k direct rollover to your Roth IRA should have an amount in Box 5. This amount will become part of your Roth IRA basis even if it is more than the amount rolled over. But I do not know if this question is asking about your prior Roth IRA basis before the rollover or just the amount added from the rollover itself. Would have to know more about exactly where you are in the program.

All of this reporting is for your 2014 return, although Ttax is also attempting to update the current status of your Roth IRA basis in case of future Roth IRA distributions.
Box 5 does have an amount. It is less than box 1. The section is on the "deductions tab" and "ira contributions". This is one of the screens following all of the possible scenarios that could occur with your IRA, such as "Adjust Roth IRA due to Divorce", or "Withdraw from IRA prior to 2014", etc.
Alan S. wrote:I assume neither of these 1099R forms has any positive number in Box 2a.
The 1099 for the Roth is 0 in 2a. The 1099 for the pre-tax it shows a positive amount for an in-plan Roth conversion in 2014.


Thank you for your answers thus far. Let me know if I need to provide more information.

Alan S.
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Re: Basis for Roth 401(k) Rollover to Roth IRA

Post by Alan S. » Mon Feb 23, 2015 4:55 pm

An IRR in 2014 opens up an entirely new set of issues. The taxable amount of that is in 2a of the G coded 1099R. Then this same amount is included in the H coded 1099R for the Roth 401k being rolled to the Roth IRA.

Can you post the numbers in the boxes for the H coded 1099R? I do not have Ttax, so all I may be able to help with is what lines 15 and 16 should indicate on the 1040. Some other posters have the desktop version and they may need to help out with this.

Did you have a Roth IRA balance before rolling over the Roth 401k?

Topic Author
NOVACPA
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Joined: Mon Apr 28, 2014 4:13 pm

Re: Basis for Roth 401(k) Rollover to Roth IRA

Post by NOVACPA » Mon Feb 23, 2015 5:06 pm

Alan S. wrote:An IRR in 2014 opens up an entirely new set of issues. The taxable amount of that is in 2a of the G coded 1099R. Then this same amount is included in the H coded 1099R for the Roth 401k being rolled to the Roth IRA.

Can you post the numbers in the boxes for the H coded 1099R? I do not have Ttax, so all I may be able to help with is what lines 15 and 16 should indicate on the 1040. Some other posters have the desktop version and they may need to help out with this.

Did you have a Roth IRA balance before rolling over the Roth 401k?
1099 #1 -> Total to Pre-tax 401(k)

Box 1: $9593
Box 2a: $528
Box 2b: Total Distribution
Box 7: G
Box 11: 2012
Box 14: $528

1099 #2 -> Total to Roth IRA:

Box 1: $11,190
Box 2b: Total Distribution
Box 5: $9649
Box 7: BG
Box 11: 2012
Box 14: $528

All other boxes $0 (Except State Identifier; not relevant)

Alan S.
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Re: Basis for Roth 401(k) Rollover to Roth IRA

Post by Alan S. » Mon Feb 23, 2015 8:05 pm

1099R #1 appears correct.
528 is apparently the amount of your in plan Roth rollover.

528 should show up on line 16b of Form 1040 as a taxable amount.

1099R #2 has several errors, and unfortunately they will affect your tax program results. You should ask for a corrected 1099R with these changes. Boxes not listed are OK as is:
1) Box 2a - should show 0; blank is different than 0 since it means they don't know what amount is taxable.
2) Box 7 - should be code H only (Direct rollover to a Roth IRA). There is a specific note in the 1099R Inst. about this. Code B does not apply because that is for distributions only, not direct rollovers. Basically, Code H is the Designated Roth version of Code G and replaces G for direct rollovers to a Roth IRA. If you enter B into your tax program, that might trigger inapplicable questions.
3) Box 10 - this should show 528 which is the amount of the rollover composed of the in plan Roth rollover you did. This amount should also be included in the Box 5 total of 9649 because it is part of the designated Roth basis, but I cannot tell if it is. Maybe you can by looking at your statements.

Most tax programs will take the info from the 1099R to not only complete your return, but also to store basis information for your Roth IRA going forward should you ever take a non qualified Roth IRA distribution which you will have to report on Form 8606.

Several 1099R errors have been reported this year involving rollovers to a Roth IRA, so when you said you did an IRR I figured that did not bode well for the accuracy of 1099R #2. Any questions please advise.

Topic Author
NOVACPA
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Re: Basis for Roth 401(k) Rollover to Roth IRA

Post by NOVACPA » Tue Feb 24, 2015 8:29 am

Alan S. wrote: 1099R #2 has several errors, and unfortunately they will affect your tax program results. You should ask for a corrected 1099R with these changes. Boxes not listed are OK as is:
1) Box 2a - should show 0; blank is different than 0 since it means they don't know what amount is taxable.
Box 2a is 0.
Alan S. wrote: 2) Box 7 - should be code H only (Direct rollover to a Roth IRA). There is a specific note in the 1099R Inst. about this. Code B does not apply because that is for distributions only, not direct rollovers. Basically, Code H is the Designated Roth version of Code G and replaces G for direct rollovers to a Roth IRA. If you enter B into your tax program, that might trigger inapplicable questions.
When I went into Turbo and changed this to code H. It pulls the $9649 through to the basis amount on the form. I've checked to see where else this number is appearing on the forms, and it looks like nowhere. In lieu of asking for a corrected 1099, I could leave it as is, manually input the basis so that it is correctly captured, and make no in-direct rollovers for 365 days, correct?
Alan S. wrote: 3) Box 10 - this should show 528 which is the amount of the rollover composed of the in plan Roth rollover you did. This amount should also be included in the Box 5 total of 9649 because it is part of the designated Roth basis, but I cannot tell if it is. Maybe you can by looking at your statements.
The $528 amount is inculded in the $9649 amount.
Alan S. wrote: Most tax programs will take the info from the 1099R to not only complete your return, but also to store basis information for your Roth IRA going forward should you ever take a non qualified Roth IRA distribution which you will have to report on Form 8606.

Several 1099R errors have been reported this year involving rollovers to a Roth IRA, so when you said you did an IRR I figured that did not bode well for the accuracy of 1099R #2. Any questions please advise.
Thank you for a great response. I am using the TT desktop version and I hope this helps people out who have the same issue.

Alan S.
Posts: 8933
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Basis for Roth 401(k) Rollover to Roth IRA

Post by Alan S. » Tue Feb 24, 2015 12:41 pm

You should get the 1099R corrected by Vanguard with respect to Box 7 coding and Box 10. The IRS will also be entering this 1099R into their own tax program and it will either reject or may produce a different result than your return. You probably don't want to deal with that hassle again several months from now even if the IRS eventually agrees with you.

Note that the one rollover rule per 12 month period only applies to IRA to IRA rollovers. Rollovers with an employer plan on one end such as these direct rollovers do not count with respect to this rule, so you don't need to be concerned with having used up your one rollover.

For future Roth IRA accounting, your Roth IRA now has 9,121 of regular contribution basis and 528 of taxable conversion basis. These amounts are added to whatever prior Roth IRA basis you might have had if this is not your first Roth IRA contribution. You need to know these amounts if you ever take a Roth IRA distribution before your Roth IRA is fully qualified. Your tax program may produce a report of this and store it for future use, so you might check for such a worksheet and keep a copy.

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