When you do a direct rollover from the pre-tax account in a workplace retirement plan to a Traditional IRA, you’ll get a 1099-R form after the end of the year that shows the rollover isn’t taxable. When you do a rollover from the pre-tax account to a Roth account, you’ll get a 1099-R form after the end of the year that shows a taxable amount.
Both of these 1099-R forms are straightforward. It’s either taxable or not taxable. You enter the 1099-R form in your tax software and tell it whether the rollover went to a Traditional account or a Roth account.
Combined 1099-R for Mixed Rollovers
When you do a mix of two or more rollovers in the same year — one to Traditional and one to Roth — your plan administrator may issue a combined 1099-R form for both rollovers. The combined 1099-R form shows that only a portion of your rollovers is taxable.
Example: Suppose you rolled over $30,000 to a Traditional IRA and $20,000 to a Roth account from the pre-tax account in your workplace retirement plan. You may get a 1099-R form that looks like this:
| Box 1 Gross Distribution | $50,000 |
| Box 2a Taxable Amount | $20,000 |
| Box 2b Taxable amount not determined | not checked |
| Box 5 Employee contributions/Designated Roth contributions or insurance premiums | $0 |
| Box 7 Distribution code(s) | G |
| Box 7 IRA/SEP/SIMPLE checkbox | not checked |
This 1099-R form is correct. It shows that a total of $50,000 came out of the plan. $20,000 is taxable because it went into a Roth account and the other $30,000 isn’t taxable because it was rolled over to a Traditional IRA.
Split 1099-R Form for Tax Software
Tax software such as TurboTax, H&R Block, or FreeTaxUSA sometimes has difficulty in dealing with a combined 1099-R form like this. The software asks you whether the money went to a Roth account. If you answer “Yes” it treats the entire $50,000 as taxable. If you answer “No” it treats the entire $50,000 as not taxable.
The software assumes that a rollover went into either a Traditional IRA or a Roth account but not both on the same 1099-R form. The trick to deal with this deficiency in the tax software is to split the combined 1099-R form into two — one for the rollover to the Traditional IRA and another for the rollover to the Roth account.
If you imported the combined 1099-R form, delete it and enter two 1099-R forms manually. Use the same payer name, address, and tax ID for both 1099-R forms.
You enter this 1099-R form for the rollover to a Traditional IRA:
| Box 1 Gross Distribution | $30,000 |
| Box 2a Taxable Amount | $0 |
| Box 2b Taxable amount not determined | not checked |
| Box 5 Employee contributions/Designated Roth contributions or insurance premiums | $0 |
| Box 7 Distribution code(s) | G |
| Box 7 IRA/SEP/SIMPLE checkbox | not checked |
You tell the software that this rollover went to a Traditional IRA. The software will make it not taxable.
Then you enter another 1099-R form for the rollover to a Roth account:
| Box 1 Gross Distribution | $20,000 |
| Box 2a Taxable Amount | $20,000 |
| Box 2b Taxable amount not determined | not checked |
| Box 5 Employee contributions/Designated Roth contributions or insurance premiums | $0 |
| Box 7 Distribution code(s) | G |
| Box 7 IRA/SEP/SIMPLE checkbox | not checked |
You tell the software that this rollover went to a Roth account. The software will make it taxable.
If your combined 1099-R form has a positive number in Box 5 because you made non-Roth after-tax contributions (“mega backdoor Roth“), include it on the applicable 1099-R form depending on whether the non-Roth after-tax contributions were rolled over to a Traditional IRA or a Roth account.
The two manually split 1099-R forms added together have the same numbers as the original combined 1099-R form. You’re splitting it only because the tax software isn’t smart enough to handle the combined 1099-R. The numbers are combined again on your 1040 tax form. It will show that you’re paying tax on only the portion that you rolled over from a pre-tax account to a Roth account.
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Brendon says
could one use a similar technique for a single 1099-misc that combines amounts applicable to two separate schedule E rental properties? this is a case that also confuses my tax software (TurboTax) in a similar manner.
Harry Sit says
Yes. When one form covers two things and the software can deal with only one, you can split the form into two to make the software work.
vickie says
hi harry.
I rolled over my 401k from previous job to Roth IRA via fidelity. Fidelity gave me a 1099R with line 1-gross (3804), line 2a-taxable (3804). line 2b=checked, line7=2, IRA/SEP/SIMPLE=checked. My previous job gave me a 1099R with line1-gross (3800), line 2a=zero, line2b=not checked, line7=G, IRA/SEP/SIMPLE=not checked. I called turbotax and they said to report both 1099R forms. When I entered the 1099R from fidelity, it asked for cost basis as of dec 31, 2022. Do I put cost basis=zero? I also did a separate backdoor Roth where I put cost basis=zero. But with this 401k to Roth IRA conversion, what should I put as the cost basis? thanks so much
Harry Sit says
It appears that you rolled over from your 401k to a Traditional IRA and then you converted it to Roth. If the 401k money was pre-tax your basis was zero.
Vickie says
Hi Harry:
Thank you for replying. I asked Fidelity to convert 401k directly to Roth but if they converted to traditional IRA then to Roth instead, then this 401k conversion is still be taxable right? I asked this because I also did $6500 backdoor Roth from traditional to Roth, which is nontaxable. And if this $3804 from 401k conversion to traditional IRA along with my $6500 backdoor, wouldn’t that exceed the $6500 Roth limit for 2023? What I did was adding $6500 backdoor and $3800 from my 1099R, and turbotax shows them as nontaxable. thanks you so much. I’m so lost
Harry Sit says
The $3,804 is taxable if you enter it correctly by saying that you converted it to Roth and your basis was zero. It doesn’t count against the $6,500 limit.
Harry Sit says
The $3,800 from the employer 401k to the traditional IRA isn’t taxable because it was only a rollover. You need to add all 3 1099-R forms: the $3,800 rollover, the $3,804 conversion, the $6,500 conversion, and finally the $6,500 contribution to traditional IRA.
vickie says
thank you so much harry. I added all 3 1099-R forms and the $3804 is finally on the taxable amount 4b line, but the problem is word “Rollover” didn’t show up next to Form 1040 Line 5a/b lol. I guess this is the issue that Turbotax still needs to fix and I hope IRS is ok WITHOUT the word rollover if everything else is correct. thanks again. have a blessed day 🙂