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My daughter moved her 401K funds of $3600 into a ROTH IRA...it totally bypassed her hands, as funds were transferred directly from 401K to ROTH. Since her 401K contributions were all tax-deferred, she now has to pay taxes on the $3600.

But, somehow, in using TaxAct...this is not showing as $3600 taxable income.

She received a 1099-R from 401K provider. She received a 1099-R from the ROTH IRA provider. I have entered both 1099-R's in the TaxAct Q&A, and it doesn't show as being income.

What am I doing wrong?


Aside from leaving out critical information?

I'm going to guess that even though she thought she was going directly from her 401(k) to her Roth IRA, what actually happened is that she went from her 401(k) to a temporary IRA, which was then converted to Roth. Otherwise there's no explanation I can think of for the 1099 from the Roth custodian.

So, for starters, what code is shown in Box 7 of each 1099-R? Please also indicate which is which, as they shouldn't be the same code.

The rollover from the employer plan should show up on line 16 of the 1040 with zero in 16b. The conversion should wind up in Part II of Form 8606, which flows to a taxable amount on line 15b of the 1040. You mentioned TaxAct Q&A. If you're using a version stored on your hard drive go into forms mode and open the 1099-R from the IRA custodian. Note the first question after you've entered the data from the form.

Phil
Rule Your Retirement Home Fool
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