How do I fix an unreported Roth 401(k) rollover?

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Topic Author
otinkyad
Posts: 499
Joined: Wed Jun 01, 2016 5:35 pm

How do I fix an unreported Roth 401(k) rollover?

Post by otinkyad »

At the beginning of 2020, I had $40,000 in Roth conversions and no contributions. I retired and rolled my 401(k) over to a traditional IRA and a Roth IRA. My Roth 401(k) had $50,000 in contributions, which is reflected on a form 1099-R for 2020 (the gross distribution in box 1 was $120,000; I'm not confusing the two). I did not file a form 8606 for 2020. Part III explicitly says "Complete this part only if you took a distribution from a Roth IRA in 2020. For this purpose, a distribution does not include a rollover [...]." I also did not include the rollover on form 1040 under line 4) Pensions and annuities, and that seems wrong. In 2021, I rolled a pension lump sum payout into a traditional IRA, for which I have a form 5498 but no 1099-R. I did not mention that on my 2021 form 1040. I am filing a form 8606 this year for the first time since tax year 2016, for a Roth conversion ladder. I'm 55, and I'll need the larger Roth basis of $90,000 to continue the ladder until I am 59-1/2. It seems like I need to report the 401(k) rollover, maybe the pension rollover, and to add the $50,000 to my basis in Roth conversions.

1. Can I amend my 2020 return at this point? I've seen mentions of a 3-year limit, and I've also seen references that the 3-year limit applies only to refunds. I e-filed my 2020 taxes on 3/19/2021.
2. If I can, I assume that I should fix the Pension and Annuities line? So I would include a 1040X with no changes, and an updated 1040 with the one line added?
3. Should I amend form 1040 for tax year 2021 to include the pension lump sum rollover?
3. How can I update the basis in conversions on form 8606 Part III to include the $50,000 in rolled-over Roth 401(k) contributions? Do I just do that manually, and do I make the change for 2020 or 2023? I've been using TurboTax Online, and I think there's a question lurking in the 1099-R interview that will let me edit the value.

Thanks for any help.
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Duckie
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Re: How do I fix an unreported Roth 401(k) rollover?

Post by Duckie »

otinkyad wrote: Mon Apr 01, 2024 1:21 am At the beginning of 2020, I had $40,000 in Roth conversions and no contributions.
To be clear, at the end of 2019 you had $40,000 in Roth IRA conversions, correct? There were no conversions in 2020, correct?
I retired and rolled my 401(k) over to a traditional IRA and a Roth IRA.
You rolled your pre-tax 401k sub-account into your TIRA and your Roth 401k sub-account into your Roth IRA, correct?
My Roth 401(k) had $50,000 in contributions, which is reflected on a form 1099-R for 2020 (the gross distribution in box 1 was $120,000; I'm not confusing the two).
Did you receive one or two 1099-Rs for the 401k rollover: one for the pre-tax portion and one for the Roth portion, or just one combined?
I did not file a form 8606 for 2020. Part III explicitly says "Complete this part only if you took a distribution from a Roth IRA in 2020. For this purpose, a distribution does not include a rollover [...]."
If you made no non-deductible TIRA contributions, no Roth IRA conversions, and no Roth IRA distributions in 2020 you would not file Form 8606.
I also did not include the rollover on form 1040 under line 4) Pensions and annuities, and that seems wrong.
The rollovers should have appeared on the Form 1040. Did you enter the 401k 1099-R(s) into the software? (The 2020 Form 1040 had Pensions and annuities on lines 5a and 5b.)
In 2021, I rolled a pension lump sum payout into a traditional IRA, for which I have a form 5498 but no 1099-R. I did not mention that on my 2021 form 1040.
Did you check your pension website / HR office to see if there was an online 1099-R for the pension distribution?
I am filing a form 8606 this year for the first time since tax year 2016, for a Roth conversion ladder. I'm 55, and I'll need the larger Roth basis of $90,000 to continue the ladder until I am 59-1/2. It seems like I need to report the 401(k) rollover, maybe the pension rollover, and to add the $50,000 to my basis in Roth conversions.
The extra $50,000 basis doesn't need to go on an IRS form. You can add it to the software but it's just informational at this time.
Can I amend my 2020 return at this point? I've seen mentions of a 3-year limit, and I've also seen references that the 3-year limit applies only to refunds. I e-filed my 2020 taxes on 3/19/2021.
You can still amend your 2020 return before April 15, 2024 to report the 401k to TIRA/Roth IRA rollovers.
If I can, I assume that I should fix the Pension and Annuities line? So I would include a 1040X with no changes, and an updated 1040 with the one line added?
You do not file a new 1040. Since you are not changing the dollar amounts you could fill out Form 1040-X Part III to explain why you are filing. See the Instructions for Form 1040-X on page 9 here:
  • "You are only changing information. If you aren’t changing any dollar amounts you originally reported, but are changing information, do the following.
    • Check the box for the calendar year or enter the other calendar or fiscal year you are amending.
    • Complete name, current address, and SSN.
    • Complete Part I, Exemptions and Dependents, on page 2, if you are changing your exemption, or, for 2018 or later years, dependent, information that doesn’t change any dollar amounts.
    • Check a box in Part II, if applicable, for the Presidential Election Campaign Fund.
    • Complete Part III, Explanation of Changes."
Since the IRS hasn't come after you yet with a CP-2000 notice I would be inclined to wait until contacted, if contacted.
Should I amend form 1040 for tax year 2021 to include the pension lump sum rollover?
It won't change the dollar amounts and you don't have the 1099-R information to enter. Can you check with the old pension for that information?
How can I update the basis in conversions on form 8606 Part III to include the $50,000 in rolled-over Roth 401(k) contributions? Do I just do that manually, and do I make the change for 2020 or 2023? I've been using TurboTax Online, and I think there's a question lurking in the 1099-R interview that will let me edit the value.
Add the extra $50,000 manually for 2023. Since it is mainly for your own records you don't need to change prior tax returns.
Topic Author
otinkyad
Posts: 499
Joined: Wed Jun 01, 2016 5:35 pm

Re: How do I fix an unreported Roth 401(k) rollover?

Post by otinkyad »

Duckie wrote: Mon Apr 01, 2024 6:07 pm To be clear, at the end of 2019 you had $40,000 in Roth IRA conversions, correct? There were no conversions in 2020, correct?
Correct, no conversions between 2016 and 2023. Just the rollovers in 2020 and 2021.
You rolled your pre-tax 401k sub-account into your TIRA and your Roth 401k sub-account into your Roth IRA, correct?

Did you receive one or two 1099-Rs for the 401k rollover: one for the pre-tax portion and one for the Roth portion, or just one combined?
Yes, and two 1099-Rs, the pre-tax coded G and the Roth coded H.
The rollovers should have appeared on the Form 1040. Did you enter the 401k 1099-R(s) into the software? (The 2020 Form 1040 had Pensions and annuities on lines 5a and 5b.)
No, I don't think I did, because I checked another TurboTax user's 1040 and a similar rollover was listed. Also, the 1099-Rs and 5498s were not in my tax folders. I found them decluttering my filing cabinet.
otinkyad wrote:In 2021, I rolled a pension lump sum payout into a traditional IRA, for which I have a form 5498 but no 1099-R. I did not mention that on my 2021 form 1040.
Did you check your pension website / HR office to see if there was an online 1099-R for the pension distribution?
I'll try to chase that down. I do have the 5498 for the pension lump sum in 2021, so I know the amount, but I don't have a 1099-R with the distribution code.
You do not file a new 1040. Since you are not changing the dollar amounts you could fill out Form 1040-X Part III to explain why you are filing. [...] Since the IRS hasn't come after you yet with a CP-2000 notice I would be inclined to wait until contacted, if contacted.
I see. I was thinking that the change occurred on the 1040, especially since the 1040-X doesn't have anything corresponding to line 5a. If I would only be submitting a 1040-X with a story in part II, given that the IRS has the G- and H-coded 1099-Rs, and hasn't sent a CP2000 for 3 years, I'm also inclined to let it slide, and move forward knowing a little more about taxes. I will try to track down the 2021 1099-R for the pension rollover, so that I have that if needed.
otinkyad wrote:How can I update the basis in conversions on form 8606 Part III to include the $50,000 in rolled-over Roth 401(k) contributions? Do I just do that manually, and do I make the change for 2020 or 2023? I've been using TurboTax Online, and I think there's a question lurking in the 1099-R interview that will let me edit the value.
Add the extra $50,000 manually for 2023. Since it is mainly for your own records you don't need to change prior tax returns.
I have the right values for each year in a spreadsheet, but I like having the same numbers on the 8606s (mine and my wife's), and also I'm pretty sure TurboTax would fill out form 8606 incorrectly once my Roth conversion ladder has exhausted the smaller, incorrect number.

Thanks much for your help.
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