TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

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neurosphere
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TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

Hi all, despite my best efforts, TaxACT 2020 is treating my entire after-tax 401k Roth conversion as taxable, despite the 1099-R being correct (small taxable amount in box 2a, appropriate value in box 5, Code G, etc) and despite my entering data identically to what I did in 2019.

I'm going to give it a few weeks to see if a TaxAct update fixes this. But I'm posting this in case anyone else is having a similar issue. I don't rule out user error, but...

I actually have two 1099-Rs. One to report the in-plan Roth conversion of the after-tax amounts, and the other to report an after-tax rollover/conversion into a Roth IRA. Both are treating the entire conversion as fully taxable.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by Alan S. »

Be sure you do not have the "IRA" box checked in your tax program.

Don't know why 2 1099R forms were issued either. Could have been combined into one.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

Alan S. wrote: Sun Jan 17, 2021 4:23 pm Be sure you do not have the "IRA" box checked in your tax program.

Don't know why 2 1099R forms were issued either. Could have been combined into one.
I have confirmed that the "IRA" box is not checked on the 1099-R nor did I inadvertently select it within the software.

As for why two 1099-Rs, Schwab actually sends a 1099-R immediately after each rollover or in-plan conversion, rather than waiting until the end of the year. If I don monthly conversions, they'll send 12 1099-Rs, every month I assume. I haven't tested this, I only do two a year. :)

In addition, in this case, one was a rollover to a Roth IRA, while the other was an in-plan conversion to a Roth sub-account within the 401k. And in that case, it would be better to have each transaction reported separately anyway, based on some past threads on this?
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by Alan S. »

Having two 1099R forms might help in taxpayer tracking of their Roth IRA rollovers, but the plan won't consider that aspect. There must be some other reason why Schwab would issue these separately.

Should have also mentioned that the "taxable amount" not determined box should not be checked either. If this also checks out, could be a bug in the software.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

Alan S. wrote: Sun Jan 17, 2021 5:22 pm There must be some other reason why Schwab would issue these separately.
The first conversion was in January, and I received the 1099-R about 10 days later. The next conversion was in August, and then received another 1099-R in September to report the new transaction. They issued these separately because I assume it's their policy not to wait until the end of the year to combine all the transactions into one unified 1099-R.
Should have also mentioned that the "taxable amount" not determined box should not be checked either. If this also checks out, could be a bug in the software.
Correct. Taxable amount not determined is not on the 1099s nor in the software. I strongly suspect a bug but am going to take a fresh look in the morning to make sure there isn't some other issue.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

I've escalated this and reported this as a bug in the software. TaxAct has asked for a de-identified data file which I sent them so hopefully they'll have an answer for me soon. I won't be filing anytime soon anyway. But last year (two years ago?) there was a bug in TaxAct that froze the program and it took weeks to resolve (actually took weeks for them to acknowledge. That bug affected anyone using 8606 to report the backdoor Roth process (and affected both the desktop versions and online versions, which each froze at the same point in the process).

Curious, anyone here using taxact to report after-tax conversions in their 401k? I.e. mega backdoor Roth?
investlikebogle
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by investlikebogle »

Hi,

I am having the same issue with Taxact. My case is slightly simpler in that I only have a conversion of after-tax 401K to in-plan Roth 401K. I am not able to figure out how to report this. As an example, my total rollover amount is $17000 with $10 as taxable and $16990 as basis.

I tried several ways in TAXACT and this is what I found

1. During filling the 1099-R form, there are two choices. The first choice asks if this is a rollover from a qualified retirement plan to a ROTH or a designated roth? It also has a check box for "in-plan roth conversion"

In this case, I add the total amount in rollover ($17000) and check the box for in-plan roth conversion. The entire amount is added to income and ROLLOVER does not appear on 1040. To set the correct basis, you have to go Federal Q&A->retirement plan income->Qualified Retirement Plan Rollover to Roth IRA and you can set the basis to 16990. However, this only applies if you have done in-plan conversion *directly* to a ROTH IRA outside the plan. So this option does not seem correct.

2. The second option is to choose (during 1099-R filing) "Is this rollover from a qualified retirement plan to another qualified retirement plan"? In this option, if I enter the rollover amount (do not check box saying "Roth ira to roth ira"), then the word ROLLOVER appears on 1040. However, there is $0 in income and entire amount is non-taxable. I think this is for the case if you move your 401K from one institution to another, which is entirely non-taxable.

So there does not seem to be a correct way.

However, turboxtax seems to be better in terms of asking the correct questions and showing ROLLOVER as well as correct taxable amount on 1040. See https://thefinancebuff.com/mega-backdoo ... botax.html
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

investlikebogle wrote: Fri Jan 29, 2021 9:01 pm I am having the same issue with Taxact. My case is slightly simpler in that I only have a conversion of after-tax 401K to in-plan Roth 401K. I am not able to figure out how to report this. As an example, my total rollover amount is $17000 with $10 as taxable and $16990 as basis.
Thanks for confirming. It seems your issue is identical to mine.

Tax Act help treated my email like a tax question "roth conversions are generally taxable", etc, despite me telling them these were after tax amounts. They have the actual data file. I replied and stated a little more bluntly that my conversion was not taxable and taxact was in error in how it was reading the 1099.

Doing things in taxact 2019 and 2020 in the identical manner leads to different outcomes, which is how I know there is likely to be mistake.

I'm hopeful they figure out before 1) I need to file, but that won't likely be until early april based on documents I need to wait for and 2) before anyone ELSE files and ends up paying taxes they don't realize they don't need to pay!
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by investlikebogle »

neurosphere wrote: Sat Jan 30, 2021 9:35 am Doing things in taxact 2019 and 2020 in the identical manner leads to different outcomes, which is how I know there is likely to be mistake
What is the difference you are seeing between 2019 and 2020?

Did it correctly reported after-tax 401K-->Roth 401K for 2019 and had ROLLOVER printed on 1040 with correct taxable amount?
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

investlikebogle wrote: Sat Jan 30, 2021 2:21 pm
neurosphere wrote: Sat Jan 30, 2021 9:35 am Doing things in taxact 2019 and 2020 in the identical manner leads to different outcomes, which is how I know there is likely to be mistake
What is the difference you are seeing between 2019 and 2020?

Did it correctly reported after-tax 401K-->Roth 401K for 2019 and had ROLLOVER printed on 1040 with correct taxable amount?
In 2019, only what appears in box 2 of the 1099-r appears as taxable income on line 5b (from memory, I think like 5b is the taxable income line). Not at my computer, but I do not think it had ROLLOVER printed, nor should it?

In 2020, the entire amount entered on line 1 (or rather, the entire amount one tells TaxAct that was either an in-plan conversion or Rollover to an IRA) ends up on 5b, rather than just the taxable amount.
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investlikebogle
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by investlikebogle »

I see. For after-tax 401K to Roth (outside 401K) conversion, you could adjust the basis in Federal Q&A->retirement plan income->Qualified Retirement Plan Rollover to Roth IRA. This option only shows if the roth rollover is chosen in 1099-R.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by cjk164 »

Just wanted to share that I am running into same issue and this was not a problem last year. I found this post after submitting a help request reporting the error. I will report back if I get anything of substance from them.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

cjk164 wrote: Sat Feb 13, 2021 2:45 pm Just wanted to share that I am running into same issue and this was not a problem last year. I found this post after submitting a help request reporting the error. I will report back if I get anything of substance from them.
Thanks so much for confirming that this issue is not unique to me! I've been using TaxAct for years and don't think it's user error in this case. Hopefully they are getting a deluge of similar help requests and they'll figure it out soon.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by panhead »

neurosphere wrote: Sun Jan 17, 2021 3:19 pm Hi all, despite my best efforts, TaxACT 2020 is treating my entire after-tax 401k Roth conversion as taxable, despite the 1099-R being correct (small taxable amount in box 2a, appropriate value in box 5, Code G, etc) and despite my entering data identically to what I did in 2019.

I'm going to give it a few weeks to see if a TaxAct update fixes this. But I'm posting this in case anyone else is having a similar issue. I don't rule out user error, but...

I actually have two 1099-Rs. One to report the in-plan Roth conversion of the after-tax amounts, and the other to report an after-tax rollover/conversion into a Roth IRA. Both are treating the entire conversion as fully taxable.
Thanks for reporting this. I will be using TaxAct for the MBR, and I did so last year as well. I've started my taxes but haven't done this part yet. I'll be following this thread looking for your resolution, and if and when I enter this and get the same issue, I will also file a bug.

Just a heads up: I found a bug in TaxAct last year and filed it as you did this one, and it was treated the same way, as a tax question. I kept pushing the issue, gave them detailed instructions on how to reproduce the error, and nothing, more useless replies from them. Then, months later (good thing filing was delayed last year) they fixed the bug in an update. That was almost the end of me using TaxAct, but I bought it again this year due to inertia, sigh. I guess we will see how this one plays out.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by investlikebogle »

panhead wrote: Sun Feb 14, 2021 3:25 pm
neurosphere wrote: Sun Jan 17, 2021 3:19 pm Hi all, despite my best efforts, TaxACT 2020 is treating my entire after-tax 401k Roth conversion as taxable, despite the 1099-R being correct (small taxable amount in box 2a, appropriate value in box 5, Code G, etc) and despite my entering data identically to what I did in 2019.

I'm going to give it a few weeks to see if a TaxAct update fixes this. But I'm posting this in case anyone else is having a similar issue. I don't rule out user error, but...

I actually have two 1099-Rs. One to report the in-plan Roth conversion of the after-tax amounts, and the other to report an after-tax rollover/conversion into a Roth IRA. Both are treating the entire conversion as fully taxable.
Thanks for reporting this. I will be using TaxAct for the MBR, and I did so last year as well. I've started my taxes but haven't done this part yet. I'll be following this thread looking for your resolution, and if and when I enter this and get the same issue, I will also file a bug.

Just a heads up: I found a bug in TaxAct last year and filed it as you did this one, and it was treated the same way, as a tax question. I kept pushing the issue, gave them detailed instructions on how to reproduce the error, and nothing, more useless replies from them. Then, months later (good thing filing was delayed last year) they fixed the bug in an update. That was almost the end of me using TaxAct, but I bought it again this year due to inertia, sigh. I guess we will see how this one plays out.
Can you comment on how the forms were filed by tax act last year for MBR?

Did it put “rollover” on line 15 (I think) of 1040 (pensions and annuities) with total amount and taxable amounts in corresponding boxes?
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by panhead »

investlikebogle wrote: Sun Feb 14, 2021 4:53 pm Can you comment on how the forms were filed by tax act last year for MBR?

Did it put “rollover” on line 15 (I think) of 1040 (pensions and annuities) with total amount and taxable amounts in corresponding boxes?
I just did the MBR in TaxAct (downloadable business owner/contractor version) and it appears to be doing it correctly.
On form 1040 it entered the rollover on line 5a (pensions and annuities), and then indicates "ROLLOVER) and on 5b (taxable amount) is blank.
Maybe this bug is version specific.
(Edited for clarity: This is for THIS year, ie tax year 2020 TaxAct Software. It is behaving correctly for me)

I did find another bug tho. When I entered the backdoor Roth IRA through the Q&A, it filled out form 8606 correctly, but my state worksheet wasn't correct and it assumed (for the state) that the full amount of the conversion was taxable, so you might want to look for that depending on your state.

I won't file until the last minute anyway, as I just don't trust taxact and I I'd like to have the most up to date version of their SW I can have before filing.

Edited again to add that I do not do "in plan" MBR, but I roll it out to my Roth IRA. I don't think this should make a difference in how it is treated, but I could be mistaken. I would think the same 1099R form still applies with the same codes....
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

panhead wrote: Tue Feb 16, 2021 9:29 am I just did the MBR in TaxAct (downloadable business owner/contractor version) and it appears to be doing it correctly.
On form 1040 it entered the rollover on line 5a (pensions and annuities), and then indicates "ROLLOVER) and on 5b (taxable amount) is blank.
Maybe this bug is version specific.
(Edited for clarity: This is for THIS year, ie tax year 2020 TaxAct Software. It is behaving correctly for me)

I did find another bug tho. When I entered the backdoor Roth IRA through the Q&A, it filled out form 8606 correctly, but my state worksheet wasn't correct and it assumed (for the state) that the full amount of the conversion was taxable, so you might want to look for that depending on your state.

I won't file until the last minute anyway, as I just don't trust taxact and I I'd like to have the most up to date version of their SW I can have before filing.

Edited again to add that I do not do "in plan" MBR, but I roll it out to my Roth IRA. I don't think this should make a difference in how it is treated, but I could be mistaken. I would think the same 1099R form still applies with the same codes....
I'm using the downloadable 2020 taxact "professional", but I've found the backbone among all the versions to be identical.

I still cannot get mine to work, nor did I get a response to my latest email. I have to report both a rollover to Roth IRA AND an in-plan conversion. But I also have a different rollover of a 401k, so 'rollover' appears regardless. I'm going to open a new dummy return and start from scratch with just the MBR and see what happens.

Notably, my 8606 forms/outcomes for federal and state are correct.

[edit to add, the rollover to a Roth IRA is being reported correctly now. But the in-plan rollover is still not, even in a newly opened file with nothing else in the return. Once I tell TaxAct it's an "in-plan rollover to a designated Roth", it makes the entire distrubution taxable. I can MAKE the right information get on the right lines in the info that's transmitted to the IRS by fudging the "information not reported on the 1099", but I'm hesitant to do so for obvious reasons]
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by investlikebogle »

neurosphere wrote: Tue Feb 16, 2021 10:02 am
panhead wrote: Tue Feb 16, 2021 9:29 am I just did the MBR in TaxAct (downloadable business owner/contractor version) and it appears to be doing it correctly.
On form 1040 it entered the rollover on line 5a (pensions and annuities), and then indicates "ROLLOVER) and on 5b (taxable amount) is blank.
Maybe this bug is version specific.
(Edited for clarity: This is for THIS year, ie tax year 2020 TaxAct Software. It is behaving correctly for me)

I did find another bug tho. When I entered the backdoor Roth IRA through the Q&A, it filled out form 8606 correctly, but my state worksheet wasn't correct and it assumed (for the state) that the full amount of the conversion was taxable, so you might want to look for that depending on your state.

I won't file until the last minute anyway, as I just don't trust taxact and I I'd like to have the most up to date version of their SW I can have before filing.

Edited again to add that I do not do "in plan" MBR, but I roll it out to my Roth IRA. I don't think this should make a difference in how it is treated, but I could be mistaken. I would think the same 1099R form still applies with the same codes....
I'm using the downloadable 2020 taxact "professional", but I've found the backbone among all the versions to be identical.

I still cannot get mine to work, nor did I get a response to my latest email. I have to report both a rollover to Roth IRA AND an in-plan conversion. But I also have a different rollover of a 401k, so 'rollover' appears regardless. I'm going to open a new dummy return and start from scratch with just the MBR and see what happens.

Notably, my 8606 forms/outcomes for federal and state are correct.

[edit to add, the rollover to a Roth IRA is being reported correctly now. But the in-plan rollover is still not, even in a newly opened file with nothing else in the return. Once I tell TaxAct it's an "in-plan rollover to a designated Roth", it makes the entire distrubution taxable. I can MAKE the right information get on the right lines in the info that's transmitted to the IRS by fudging the "information not reported on the 1099", but I'm hesitant to do so for obvious reasons]
I checked it (online version for filing 2020 taxes) and for me the rollover to a Roth IRA does NOT say "ROLLOVER" on 1040, although the taxable amount is computed correctly.

MBR is still not working correctly. TAXACT assumes that the entire rollover is to a Roth IRA outside the 401k plan.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by kd2008 »

Don't waste time on fixing the software or figuring out correct way to enter or endlessly email taxact etc...it doesn't matter one whiff if it is an in-plan roth conversion or rollover to Roth IRA outside the plan - software as written doesn't seem to care anyways. Just focus on getting the dollar amounts right on your tax form. Make sure your 1099-R has Code G and that it reports the taxable amount correctly.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by KSOC »

TaxAct reported the 1099R of a life insurance (It was an old policy and whole life) surrender as all taxable. It wasn't. Post tax money paid the premiums for its entirety, so only the gains were taxable. I questioned them and they told me their calculations were correct. I ran Turbo Tax and Freetax USA. Both calculated correctly, asking more detailed questions about the surrender such as from what monies paid the premiums. TaxAct did not. This is the second issue two years in a row with TaxAct, so next year they won't be involved in the mix.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

kd2008 wrote: Wed Feb 17, 2021 6:19 am Don't waste time on fixing the software or figuring out correct way to enter or endlessly email taxact etc...it doesn't matter one whiff if it is an in-plan roth conversion or rollover to Roth IRA outside the plan - software as written doesn't seem to care anyways. Just focus on getting the dollar amounts right on your tax form. Make sure your 1099-R has Code G and that it reports the taxable amount correctly.
That's what I'll likely ultimately do. Currently, I told taxact I only converted the taxable portion, so only that amount shows as taxable on the 1040. The 1099-R is correct. The 1040 is correct. I don't believe any other parts of the return or even worksheets are affected by my intentional "error".
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by Alan S. »

Just opened this thread again.

Was the basis for the IRR shown in Box 5 of the 1099R? It should be. And did you try entering the correct Box 5 amount into Tax Act?
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

Alan S. wrote: Wed Feb 17, 2021 1:38 pm Just opened this thread again.

Was the basis for the IRR shown in Box 5 of the 1099R? It should be. And did you try entering the correct Box 5 amount into Tax Act?
yes, box 5 is correct on the 1099 and as entered in TaxACT. Box 2a+5=1

Something interesting I just discovered. If I don't give taxact any additional information about the in-plan rollover, it puts the correct taxable amount on the 1040. But look what happens if I do as requested and enter the additional information that 1) it's an in-plan rollover to a designated Roth account and 2) the amount that was "rolled over to a Roth or designated Roth"...

If I enter the correct amount of the rollover (i.e. box 1 of the 1099), it incorrectly treats the whole rollover as taxable. But if I enter an arbitrary value LESS than the taxable amount (including zero) it correctly keeps the taxable amount (box 2a) on the 1040.

It's acting as if I shouldn't bother giving TaxAct any more information than is already on the 1099. If I do, it makes a mistake. Why does it needs to know whether this was an in-plan rollover, if the 1099 already gives all the necessary info? Same with rollover to a Roth IRA I entered. Everything is correct, whether I tell TaxAct the amount converted to a Roth IRA, or I don't. Hmmm.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by panhead »

neurosphere wrote: Wed Feb 17, 2021 1:54 pm Something interesting I just discovered. If I don't give taxact any additional information about the in-plan rollover, it puts the correct taxable amount on the 1040. But look what happens if I do as requested and enter the additional information that 1) it's an in-plan rollover to a designated Roth account and 2) the amount that was "rolled over to a Roth or designated Roth"...
This makes sense. I'm not doing an IRR and everything is populated correctly and the transaction is not taxed. To be even more clear I'm doing a split rollover, so the earnings went to tIRA.

That being said, it's not clear to me why you are giving TaxAct any more information than is on the 1099R. When you go down this path with the Q&A, does it request it? Is this the way you did it last year?
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

panhead wrote: Wed Feb 17, 2021 5:57 pm
neurosphere wrote: Wed Feb 17, 2021 1:54 pm Something interesting I just discovered. If I don't give taxact any additional information about the in-plan rollover, it puts the correct taxable amount on the 1040. But look what happens if I do as requested and enter the additional information that 1) it's an in-plan rollover to a designated Roth account and 2) the amount that was "rolled over to a Roth or designated Roth"...
This makes sense. I'm not doing an IRR and everything is populated correctly and the transaction is not taxed. To be even more clear I'm doing a split rollover, so the earnings went to tIRA.

That being said, it's not clear to me why you are giving TaxAct any more information than is on the 1099R. When you go down this path with the Q&A, does it request it? Is this the way you did it last year?
-- Yes, this is the way I did it last year.
-- Yes, I BELIEVE taxact is requesting this info, as it frequently uses such additional fields/entries to support the documents received. I don't go through the Q/A process (too long! I use forms mode because I know what i'm doing and what the final return should look like. Or at least, i think I know what I'm doing, lol)
-- I've used TaxAct for about 5 years now to report after-tax in-plan roth conversions.

I think what I'm going to do, just for my curiosity, is create new returns in TaxAct 2019 and 2020 and enter the identical 1099s using the same steps with nothing else in the return and see what happens. :D
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by Alan S. »

Perhaps Tax Act is gathering data so they can track the composition of your Roth IRA, including the basis of conversions and rollovers. That allows the program to correctly report future Roth IRA distributions.

But if the program does not know whether a given rollover went to the Roth IRA or the designated Roth, it will not be able to correctly track Roth IRA basis. The program probably does not need to track qualified plans, since the 1099R issued by a qualified plan does not rely on the taxpayer providing the correct basis. But for Roth IRAs they must collect the basis from the taxpayer.

Maybe all these tracking questions create their own problems, unlike something like IRS Free File Fillable forms that does not endeavor to collect extra data, just enough to file the return.

Your issue certainly appears to be a bug that was not caught in pre testing.
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

Alan S. wrote: Wed Feb 17, 2021 7:51 pm Your issue certainly appears to be a bug that was not caught in pre testing.
As always Alan, thanks so much your time, your expertise, and your desire and willingness to provide uncompensated time to the Bogleheads community and furthering the mission of the Bogle Foundation for Financial Literacy! https://boglecenter.net/

Of course, thanks to EVERYONE who posts on this forum. :beer
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".
investlikebogle
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by investlikebogle »

panhead wrote: Wed Feb 17, 2021 5:57 pm
neurosphere wrote: Wed Feb 17, 2021 1:54 pm Something interesting I just discovered. If I don't give taxact any additional information about the in-plan rollover, it puts the correct taxable amount on the 1040. But look what happens if I do as requested and enter the additional information that 1) it's an in-plan rollover to a designated Roth account and 2) the amount that was "rolled over to a Roth or designated Roth"...
This makes sense. I'm not doing an IRR and everything is populated correctly and the transaction is not taxed. To be even more clear I'm doing a split rollover, so the earnings went to tIRA.

That being said, it's not clear to me why you are giving TaxAct any more information than is on the 1099R. When you go down this path with the Q&A, does it request it? Is this the way you did it last year?

The reason is that Taxact is interpreting it as taking a cash distribution. If I did not check IRR and put 0 for Roth conversion, taxable amount is correct. This will also happen if you took an equivalent cash distribution.

The question is not getting the amount correct on 1040 but also correctly reporting it. I am moving to TurboTax since it is doing it properly
investlikebogle
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by investlikebogle »

Alan S. wrote: Wed Feb 17, 2021 7:51 pm
But if the program does not know whether a given rollover went to the Roth IRA or the designated Roth
This.

If your rollover was to a Roth IRA outside your 401K, TAXACT is working correctly. You do not check the IRR box, put the total amount (Box 1) into conversion amount question. Then you can set your basis using FederalQ&A->Retirement plan income->Qualified Retirement Plan Rollover to Roth IRA. Everything works correctly.

But if the rollover is in-plan conversion, it does not distinguish it and assumes that rollover was done to Roth IRA outside the plan.
panhead
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by panhead »

neurosphere wrote: Wed Feb 17, 2021 6:12 pm
panhead wrote: Wed Feb 17, 2021 5:57 pm
neurosphere wrote: Wed Feb 17, 2021 1:54 pm Something interesting I just discovered. If I don't give taxact any additional information about the in-plan rollover, it puts the correct taxable amount on the 1040. But look what happens if I do as requested and enter the additional information that 1) it's an in-plan rollover to a designated Roth account and 2) the amount that was "rolled over to a Roth or designated Roth"...
This makes sense. I'm not doing an IRR and everything is populated correctly and the transaction is not taxed. To be even more clear I'm doing a split rollover, so the earnings went to tIRA.

That being said, it's not clear to me why you are giving TaxAct any more information than is on the 1099R. When you go down this path with the Q&A, does it request it? Is this the way you did it last year?
-- Yes, this is the way I did it last year.
-- Yes, I BELIEVE taxact is requesting this info, as it frequently uses such additional fields/entries to support the documents received. I don't go through the Q/A process (too long! I use forms mode because I know what i'm doing and what the final return should look like. Or at least, i think I know what I'm doing, lol)
-- I've used TaxAct for about 5 years now to report after-tax in-plan roth conversions.

I think what I'm going to do, just for my curiosity, is create new returns in TaxAct 2019 and 2020 and enter the identical 1099s using the same steps with nothing else in the return and see what happens. :D
If you would like me to try any experiments, let me know.
e5116
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by e5116 »

panhead wrote: Tue Feb 16, 2021 9:29 am
investlikebogle wrote: Sun Feb 14, 2021 4:53 pm Can you comment on how the forms were filed by tax act last year for MBR?

Did it put “rollover” on line 15 (I think) of 1040 (pensions and annuities) with total amount and taxable amounts in corresponding boxes?
I did find another bug tho. When I entered the backdoor Roth IRA through the Q&A, it filled out form 8606 correctly, but my state worksheet wasn't correct and it assumed (for the state) that the full amount of the conversion was taxable, so you might want to look for that depending on your state.
Hmmm I did Backdoor Roth already and seemed to work on the Federal. It also didn't change my state refund so I assume it's not an issue for me or did it pop up when you got to the state part? I haven't gotten to that yet. Just wondering what I should check.
panhead
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by panhead »

e5116 wrote: Thu Feb 18, 2021 9:55 pm
panhead wrote: Tue Feb 16, 2021 9:29 am
investlikebogle wrote: Sun Feb 14, 2021 4:53 pm Can you comment on how the forms were filed by tax act last year for MBR?

Did it put “rollover” on line 15 (I think) of 1040 (pensions and annuities) with total amount and taxable amounts in corresponding boxes?
I did find another bug tho. When I entered the backdoor Roth IRA through the Q&A, it filled out form 8606 correctly, but my state worksheet wasn't correct and it assumed (for the state) that the full amount of the conversion was taxable, so you might want to look for that depending on your state.
Hmmm I did Backdoor Roth already and seemed to work on the Federal. It also didn't change my state refund so I assume it's not an issue for me or did it pop up when you got to the state part? I haven't gotten to that yet. Just wondering what I should check.
If there was no change in your refund/owed for state then I would imagine it is OK. I had to correct it on the worksheet. It didn't enter the contributions for the IRA as "previously taxed."
tortoise84
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by tortoise84 »

I did a mega backdoor Roth to move my after-tax 401k contributions to a Roth IRA, and this is how I entered it in TaxAct:

If you enter the 1099-R using step-by-step guidance, you'll get to this screen:

Retirement Plan Income - Rollover Amount
Enter the portion of the $32,403.65 distribution, if any, that was rolled over to a traditional IRA or another qualified retirement plan. Also enter rollovers from one Roth IRA to another Roth IRA and direct rollovers from a designated Roth account to another designated Roth account or to a Roth IRA, but do not include amounts converted to a Roth IRA or amounts rolled over from a pension plan to a Roth IRA here.

Rollover amount
$0.00

It actually defaults to 32403.65, but I zeroed it out because it did not go to a traditional IRA or another qualified retirement plan, and did not come from a Roth IRA or designated Roth [401k].

But then you actually have to use the quick entry form and enter it where it says:

Rollovers from Qualified Retirement Plans to Roth IRAs and In-plan Rollovers to Designated Roth Accounts
Enter the amount, if any, that was rolled over to a Roth or designated Roth here ... 32,403.65
Check if this is an In-plan Rollover to a Designated Roth Account

Then there will be an alert that says:

Form 1099-R - Rollover from Qualified Retirement Plan
Entries on Form 1099-R from [401k] indicate that $32,403.65 of the distribution of $32,403.65 was rolled from a qualified retirement plan to a Roth IRA. Is this correct?

Roth rollover amount
$32,403.65

The tax will jump up, but you will then be taken to the nondeductible IRA screens if you did a regular backdoor Roth, and this screen for mega backdoor Roth:

Taxpayer Rollovers From Retirement Plans to Roth IRAs - Basis
Enter [your] basis in the $32,404 amount that was rolled over from qualified retirement plans to Roth IRAs in 2020. If [your] basis in the amount rolled over to a Roth is zero, leave the entry blank and click Continue.

Basis
$32,404

This makes the taxable amount 0, which is correct in my case.

I also attached a note which you can enter under Retirement Plan Income, IRA distribution explanation, because I'd rather not have to deal with a CP2000 notice if the IRS doesn't understand what I did, or I entered it in wrong.
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neurosphere
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

tortoise84 wrote: Sun Apr 04, 2021 4:55 pm I did a mega backdoor Roth to move my after-tax 401k contributions to a Roth IRA, and this is how I entered it in TaxAct:
Wow, I never ever ever would have figured that out. Partly because I could not have imagined that I would have to go through the Q&A for the 1099-R, give all the correct info and THEN go through 5-10 more screens that are irrelevant to me before seeing the alert about the Roth rollover/conversion.

But THEN I realized that info flowed through to the 8606. After line 25 in Part III. Wait, what? Form 8606 doesn't have any entries after line 25. Except that it seems TaxAct uses this space to add three new lines. A "Part IV" if you will, called "2020 Rollovers from Qualified Retirement Plans to Roth IRAs and in-plan Rollovers to Designated Roth Accounts".

And it allows you to manually enter your basis.

Frustratingly, if you have both an in-plan rollover and a rollover to an IRA in the same year (as I did) it then changes all the rules again, and says to only enter the basis for the IRA rollover, and then to manually calculate/enter the taxable about of the in-plan conversion. :oops:

Regardless, now I know where TaxAct "keeps" the basis info for in-plan rollovers (on a "fake" section of it's 8606). I'll have to go back and see what I did in previous years.

THANK YOU tortoise!

Now I gotta figure out whether the state return is correct. And also in the future I will not do both an IRA rollover and in-plan conversion in the same year. It was a one-time experiment. :annoyed
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".
cjk164
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by cjk164 »

neurosphere wrote: Sun Apr 04, 2021 6:35 pm
tortoise84 wrote: Sun Apr 04, 2021 4:55 pm I did a mega backdoor Roth to move my after-tax 401k contributions to a Roth IRA, and this is how I entered it in TaxAct:
Wow, I never ever ever would have figured that out. Partly because I could not have imagined that I would have to go through the Q&A for the 1099-R, give all the correct info and THEN go through 5-10 more screens that are irrelevant to me before seeing the alert about the Roth rollover/conversion.

But THEN I realized that info flowed through to the 8606. After line 25 in Part III. Wait, what? Form 8606 doesn't have any entries after line 25. Except that it seems TaxAct uses this space to add three new lines. A "Part IV" if you will, called "2020 Rollovers from Qualified Retirement Plans to Roth IRAs and in-plan Rollovers to Designated Roth Accounts".

And it allows you to manually enter your basis.

Frustratingly, if you have both an in-plan rollover and a rollover to an IRA in the same year (as I did) it then changes all the rules again, and says to only enter the basis for the IRA rollover, and then to manually calculate/enter the taxable about of the in-plan conversion. :oops:

Regardless, now I know where TaxAct "keeps" the basis info for in-plan rollovers (on a "fake" section of it's 8606). I'll have to go back and see what I did in previous years.

THANK YOU tortoise!

Now I gotta figure out whether the state return is correct. And also in the future I will not do both an IRA rollover and in-plan conversion in the same year. It was a one-time experiment. :annoyed
Were you able to get ROLLOVER to show up on your 1040 with these steps? Mine is showing the correct amounts but still won't show ROLLOVER.
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neurosphere
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Re: TaxAct. Reporting after-tax 401k --> In-plan Roth Conversion not correct. Bug, or user error?

Post by neurosphere »

cjk164 wrote: Mon May 03, 2021 1:28 pm Were you able to get ROLLOVER to show up on your 1040 with these steps? Mine is showing the correct amounts but still won't show ROLLOVER.
Actually, yes, it does have ROLLOVER. I had not checked that detail prior to efiling (or I did, but forgot that I did).
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".
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