Forms 1040/8606 with a 401K rollover to Roth IRA

Submitted by Judith Ambery on Sun, 2010-04-04 14:34

In December, 2009, I rolled over my 401K from my previous employer to a Roth IRA. T. Rowe Price issued a 1099R showing the gross distribution in Box 1 and 0.00 in Box 2a. They claim a form 5498 will be sent by them in May, 2010 showing the conversion to a Roth. Hope this is correct. I am retired and I don’t believe any income tax was ever paid on the amount being rolled over.

My question is: On Form 1040, my accountant completed Line 15a and 15b and his tax program printed a Form 8606 for filing. I disagree with him since the rollover was from a 401k and not a traditional IRA. From what I’ve read on the IRS website and instruction booklet, the amount should be reported on Line 16a and 16b and is not reported on Form 8606.

Please help. Also, if Line 16a and 16b is completed, do I indicate on the form that it was a rollover? If so, where? Thanks for your help.

Judy



Submitted by Charles Saylor on Sun, 2010-04-04 16:05

For what it’s worth, I rolled over a 403b to a Roth in October 2009, and my 1099-R from Vanguard showed 0 in Box 2a also. They were quite insistent that they were correct when I (stupidly) called to ask about it, but then some 30 days later I received a *Corrected* 1099-R showing the distribution amount in Box 2a.

Submitted by Alan Spross on Sun, 2010-04-04 20:56

Judy,

You are correct. The accountant incorrectly entered this as an IRA to Roth conversion. The distribution was not from an IRA and therefore is reported on line 16 of Form 1040 with the taxable amount on line 16b. For the 1099R the taxable amount should be reported in Box 2a and if you did not have any after tax contributions in the plan, the distribution is fully taxable as a Roth conversion. If there were any after tax contributions converted, that amount goes in Box 5 and only the taxable amount in 2a. Form 8606 does NOT apply for direct Roth conversions from a qualified plan. Since 2009 was only the second year for direct Roth conversions, the plans are not used to the 1099R reporting instructions, nor are some preparers evidently.

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