Retirement Savings and Benefits
Questions and comments about IRAs, 401k accounts, social security, and other forms of retirement savings and benefits.
1099-R from pension rollover to Roth IRA
Posted by: Windfallhelp, March 23, 2017 05:58PM
I took a lump sum distribution from my pension plan last year and rolled it directly into my Roth IRA (distribution check was made out to my Roth IRA account number, so there was no intermediate conversion or anything like that).

The 1099-R form I just received has distribution code G, with the distribution amount in box 1. However, box 2a (taxable amount) is blank, and box 2b (taxable amount not determined) is NOT checked. Does this sound correct? Shouldn't the rollover be taxable since it went from a non-Roth to a Roth account?

Re: 1099-R from pension rollover to Roth IRA
Posted by: Alan S., March 23, 2017 08:16PM
It is not correct, but unfortunately quite a few people have been reporting this same error for the last few years. I think the problem is that 99% of the direct rollovers are to a TIRA and from force of habit the 1099R issuer is leaving 2a blank. They are not looking for indications that a direct rollover to a Roth IRA has occurred.

Such a rollover would not be taxable if it was an immediate rollover of an after tax employee contribution like some participants are doing. But this is not the situation in your case.

You should call them and explain why they need to issue a corrected 1099R ASAP. Note that Box 2b should not be checked in this situation such as would be the case for an IRA distribution/conversion. 2a and 2b are inconsistent here with 2a being the incorrect box.

Re: 1099-R from pension rollover to Roth IRA
Posted by: Windfallhelp, March 24, 2017 04:49PM
Interestingly, I tried putting the amount from box 1 into box 2a (as if I had a corrected form) when entering the 1099-R in TurboTax, and it looks like TurboTax takes me through the same screens with the same tax result regardless of what's in box 2a. One of those screens asked whether the money was rolled into a Roth IRA, and if I choose yes, the amount is added to income regardless of the contents of box 2a.

Do you think it's necessary to get a corrected form in this case? Are there likely to be any issues when the IRS later tries to match the 1099 up against the 5498 that will be generated (not sure if they do this)?

Re: 1099-R from pension rollover to Roth IRA
Posted by: Alan S., March 24, 2017 06:52PM
The only way to bring this to a conclusion is to secure a corrected 1099R. If you don't, the plan could fail an audit or otherwise discover their error and issue a corrected 1099R down the road which would then be compared to your return.

Box 2a on a Roth rollover could vary from 0 to the full Box 1 amount depending on how much in after tax contributions were included in the rollover. Most such rollovers are fully taxable because most people have not made after tax contributions to their plan. Therefore, matching up the 5498 to the 1099R taxable amount only confirms that the rollover went into the Roth account, not that any particular portion of it should be taxable.

Your tax program should tax the rollover if you put taxable income in 2a. 2a plus Box 5 should equal Box 1. Box 2b should not be checked unless 2a is blank. IRA box 7 should not be checked. With this combination the 2a amount should be taxed by the program and entered on line 16b.

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