Traditional 401(k) to Roth IRA distribution rolled into Traditional IRA accidentally
Hello,
I have someone who initiated a conversion from his Traditional 401(k) to a Roth IRA, but he provided his Traditional IRA account number to the 401(k) when requesting the distribution. His IRA custodian deposited the check into his Traditional IRA. He didn’t realize what happened until the first week of January, at which point, his advisor converted the funds to his Roth IRA (in 2025).
The 1099-R from the 401(k) of course has code G and reports the distribution as taxable. Should he try to get a corrected 1099-R from the 401(k), or go ahead and report it as a non-taxable rollover with an explanation to the IRS? Or is there some other way to correct this?
Thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2025-04-10 19:05
The deposit of rollovers into the wrong type of account are very difficult to correct. One option is to file an extension, wait until the TIRA custodian issues a 5498 showing a rollover contribution to the IRA, and provide a copy of the 5498 to be issued next month with the return with an explanation why the 1099R is being reported with Box 2a changed to 0. Whether the IRS will accept this or not, I don’t know.
The 1099R for the IRA conversion will not be issued until next January, and tax will be owed for that conversion instead of for the botched rollover.
The plan almost certainly will not issue a corrected 1099R for 2024 in most cases, since the plan did not make the error. But it can’t hurt to ask along with providing a copy of the TIRA statement for the deposit month showing the rollover contribution to the TIRA.