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Why there is no tax generated for my traditional 401k to Roth IRA rollover?

JoeHsiao

In March 2024, I rolled over the money in a traditional 401k account from a different financial company to Roth IRA in Fidelity, and I expected that the rollover will generate tax for 2024. The time comes to Feb 2025, after including from 1099-R sent from the 401k financial company, somehow the rollover does not create any tax in my return. Am I missing anything?

In 1099-R, the Taxable amount is 0, Total distribution in 2b is checked, and Distribution code in item 7 is G. No other positive amount appears on the form except the Gross distribution in item 1.

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JMSSGV

Is "taxable amount not determined" checked?

JoeHsiao

No, taxable amount not determined is not checked.

MatthewD

Hello JoeHsio,

The code in Box 7 of your 1099-R is critical for how the software treats your distribution. You mentioned the Box 7 code was G which is a "Direct rollover to a qualified plan." A Direct rollover to a qualified plan generally means that there will not be any tax consequences. If this had been a conversion from a regular 401(k) to a Roth IRA, then it would generate taxable income and a different code for Box 7. I suggest you check to see if you had a direct rollover or a conversion.

JoeHsiao

Okay I found what I was missing.

Fidelity, who holds the Roth IRA account, said the tax consequence of the rollover is being covered in the 1099-R forms for the Roth IRA account.

golden_crow

I have the same issue, but I still don't have a 1099-R from the Roth IRA account. The brokerage agent says it is only reported on 5498, and I am not sure if that is correct.

JericaG

Hello golden_crow,

In the first situation in this thread there are two 1099-R forms. The first one being for the roll over from a traditional 401k to a traditional account with their broker, then another one for the conversion from a traditional account to a Roth IRA.

The Roth IRA does only have information reported on a 5498 which shows the amount that was converted.

If your situation is the same then you should have these two forms as well. It does depend on how each broker treats the roll over and conversion as to how it is reported.

If instead, you converted directly from your 401k to a Roth IRA and your broker did not take this middle step, then you should only have one 1099-R form showing the taxable conversion. You will need to note that this was a conversion to a Roth IRA. This will properly treat your distribution as taxable in the software.

golden_crow

Hey JericaG,

Thanks for helping out. That is exactly my understanding as well. This is a direct rollover from 401k to Roth IRA. The problem is that the only 1099-R I got shows $0 taxable amount in box 2a, and freetaxusa thinks it is non-taxable even though it confirms with me if I rolled over to a Roth IRA. It seems that I can override box 2a manually in the software, but I am really hesitating at this point, because I don't think I am the first one doing this type of conversion and something else must be wrong.

golden_crow

Hey Jerica,

Just noticed that you are FreeTaxUSA Agent. Is there any way that you or someone can take a look at the generated form of my return and let me know what is going on? I can pay if it is caused by a mistake I made, but I am really confused.

TaxMorgan

Hello golden_crow,

We are not able to view your account information here in the community. If you reach out to us directly from the Support Center in your account we can view your forms and help you from there.

The distribution code in Box 7 of your 1099-R will also contribute to the taxability of the distribution.