Form 1099 coding on pre-tax 401k to Roth IRA
Dear Alan et al,
I have a CPA that I’m collaborating with and we have a question. A client converted a pre-tax 401(k) balance (employer match) directly to a Roth IRA. Should his 1099-R have been coded ‘G’ for ‘Direct rollover and direct payment?’
Thanks in advance,
Chris
Permalink Submitted by Alan - IRA critic on Mon, 2022-04-18 17:11
Yes, G is correct. If the rollover had come from the Roth 401k portion, H would apply. What code was shown?
Permalink Submitted by Christopher Combs on Mon, 2022-04-18 18:50
HI Alan,Code G is what was shown. For some reason, the CPA’s preparation software is showing the distribution as ‘non-taxable’ even though the money went from pre-tax 401k to Roth IRA. He plans to override the software by changing the code somehow. Thanks again,Chris
Permalink Submitted by Alan - IRA critic on Mon, 2022-04-18 21:35
The code is correct, but Box 2a probably failed to show the correct taxable amount. Out of habit from reporting the usual rollovers to TIRAs instead of Roth IRAs, this is a frequent custodian error. The client should request a corrected 1099R.
One possible issue caused by this error is that if this rollover included any after tax amounts that ordinarily would have been reported in Box 5, 5 would not show that after tax amount because 2a did not show the taxable amount. In other words, 2a and 5 are coordinated so if the employer messes up one of them, they are both wrong. If CPA is going to correct this by entering the full amount as taxable, client should know this to be correct, or they will be taxed twice on the amount that was after tax.