1099-R and Mega Backdoor Issue using TurboTax

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AllMostThere
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1099-R and Mega Backdoor Issue using TurboTax

Post by AllMostThere » Sun Feb 10, 2019 6:41 pm

As done in prior years, I initiated an "in-service" distribution of my aftertax contributions from my 401K. The aftertax contributions went to my Roth IRA, and the growth of $398 went to my tIRA. Also, similar to prior years, the 1099-R shows in Box 1 - Gross Amt (AT + Growth), Box 2a - $0, Box 5 - amount sent to Roth, Box 7 - G, IRA/SEP/Simple box unchecked. For some reason TT is keeping the $398 that went to my tIRA as "taxable" income and forcing a taxable amount. I cannot find where I went wrong, or if TT is wrong. Any suggestions from the awesome forum or TT experts?

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tfb
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Re: 1099-R and Mega Backdoor Issue using TurboTax

Post by tfb » Sun Feb 10, 2019 7:10 pm

Try splitting the 1099-R into two. One for the earnings rolled over to traditional, with the earnings in box 1 and no basis in box 5. The second for the after-tax amount in box 1 and box 5. Answer the questions separately for each 1099-R.
Harry Sit, taking a break from the forums.

Topic Author
AllMostThere
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Re: 1099-R and Mega Backdoor Issue using TurboTax

Post by AllMostThere » Sun Feb 10, 2019 8:55 pm

tfb wrote:
Sun Feb 10, 2019 7:10 pm
Try splitting the 1099-R into two. One for the earnings rolled over to traditional, with the earnings in box 1 and no basis in box 5. The second for the after-tax amount in box 1 and box 5. Answer the questions separately for each 1099-R.
Thanks tfb. Your post makes sense and got me pointed in right direction. Using your basis, I was able to search the TT Support Forum and found the info below. I used the recommended process and it solved the issue. Didn't know this type of 1099-R manipulation was allowed.

https://ttlc.intuit.com/questions/45899 ... n-a-1099-r

"Turbotax is incorrectly assessing tax on a 1099-R. Please help. It should be 0 tax, as is indicated in the 1099-R box 2a. But, when I enter it, Turbotax is assessing tax in the amount of $198.00. Please help.

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Ah....OK that explains it.

TurboTax does not directly support a single 1099-R going to two different destinations.

What you must do is split the 1099-R into two 1099-Rs.

For the amount rolled to the Traditional IRA.

1) In box 1 use the original 1099-R box 1 minus the box 5 amount.

2) Box 2a = 0.

3) Box 5 = blank.

4) Box 7 = G.

5) Answer NO to the two interview questions that ask about a Roth - the default is a Traditional IRA.

For the amount rolled to the Roth IRA.

1) In box 1 enter the original box 5 amount.

2) Box 2a - 0.

3) Box 5 = original box 5 amount.

4) Box 7 = G.

5) Answer NO to the first interview question about a 401(k) Roth and YES to the rollover to a Roth IRA.

That should properly report the 1099-R. The box totals of the two 1099-R should equal the amounts on the original 1099-R.

Nothing about splitting into two 1099-R's go on a tax return - the IRS only gets the dollar amounts on the 1040 form."

Alan S.
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Re: 1099-R and Mega Backdoor Issue using TurboTax

Post by Alan S. » Sun Feb 10, 2019 9:57 pm

The root cause of this problem is that when there are two transactions that have different instructions for a 1099R box (Boxes 2a and 5 in this case), the 1099R Inst should state that a separate 1099R form is required for each. The instructions fail to do that.

Since this is not stated, 1099R issuers default to the general rule that if different codes are indicated for Box 7 a separate 1099R is needed. But this also applies to other boxes, not just box 7.

Fortunately, most mega back door rollovers are directed solely to a Roth IRA and there is no tax program entry problem.

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