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2020 1099-R 401k to Roth Conversion but didn't receive check until 2021

Forum|Forum|4 years ago
March 21, 2022
13 replies
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My client left her job in 2020 and directed her tax-deductible 401k balance to be rolled over into a Roth IRA. The 2020 1099-R had Code G and they did their own taxes in 2020 and this was reported as a regular rollover, so no taxes were paid. However, the 2020 401k check was lost in the mail and had to be reissued in 2021, so the client didn't open her Roth until March of 2021 when she received the check.

To record the tax on the Roth conversion, do I amend the 2020 tax return to include the Roth conversion or is there a way record it on the 2021 return, since that's when she actually received the payment.

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Best answer by dascpa

Code G is trustee to trustee for rollovers, not conversions. Since the rollover is t-to-t it complies with the 60 day time frame and is reportable, not taxable.

For a conversion the investment house will issue it as Code 1 or Code 7. If it is Code 1 for being under age 59 1/2 the conversion checkbox will remove the 10% penalty since it does not apply.

Investment houses are notorious for screwing up the coding.

This transaction is to follow the facts. The rollover happened in 2020, the conversion happened in 2021.

...If you move money from your 401(k) plan to an IRA, that's a rollover. And a Roth conversion occurs when you change a traditional IRA to a Roth IRA. The distinction is important because the IRS treats these transactions differently for tax purposes.

Just-Lisa-Now-

Intuit Community Champion

if the 1099R says 2020 on it, the IRS will expect to see it on a 2020 return.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

N

NPChristyAuthor

Level 4

It's on the 2020 return, but just as a direct rollover, non-taxable event.

qbteachmt

Level 15

"The 2020 1099-R had Code G and they did their own taxes in 2020 and this was reported as a regular rollover"

But there is no Account at this point, so there was no rollover?

"so no taxes were paid."

Unless that was a Roth 401(k) to Roth IRA, there is Conversion and there would be taxes owed.

"Rollover" is not the same as Taxable or not.

"so the client didn't open her Roth until March of 2021 when she received the check."

If she received the check, that would only be Rollover if it was deposited with the required timeframe. It is Rollover from "like type account to like type account" such as 401(k) to Trad IRA (both are pre-taxed dollars), Roth 401(k) to Roth IRA (both are post-tax dollars). Of course, an employer can offer each type of 401(k) account and the employee can have the amounts Split accordingly, as required, or still decide to do conversion on the sheltered/deferred portion (the 401(k)).

"To record the tax on the Roth conversion, do I amend the 2020 tax return"

Yes...

"to include the Roth conversion"

to Remove it. Unless there is a 1099-R for the 401(k) for 2020? And if so, was the deposit to Roth made in the timeframe of "rollover" or was that delay too long?

"or is there a way record it on the 2021 return, since that's when she actually received the payment."

Either way, it seems 2020 was wrong and needs to be amended.

Don't yell at us; we're volunteers

dascpa

Level 11

You cannot "rollover" a Traditional IRA, 401(k), etc. into a Roth. You can convert it to a Roth. Big difference.

There was no 2020 Roth conversion. The conversion happened in 2021 and you report it as such. The investment house should have issued a 2021 1099-R for the conversion but I've seen some not do it when it's internal. In that case use the investment house data from the 2020 1099-R and create your own 2021 1099-R and then on page 2, box B5 of the 1099-R Worksheet mark that the entire amount was converted to a Roth.

rbynaker

Level 13

Maybe I'm the only one, but I miss the good ol' days when you could only go from a 401(k) to a Traditional IRA. Then if you wanted to convert to Roth that was a separate transaction. Now it's like the Wild West and the bank/broker reporting is only as good as what the client self-reports on the distribution paperwork.

J

jeffmcpa2010

Level 10

Isn't Code "G" a Direct Trustee to Trustee rollover?

I do know sometimes they mail a check to the Taxpayer made out to the new trustee - but might it be possible that the rollover time frame limit might not come into play?

dascpaAnswer

Level 11

Code G is trustee to trustee for rollovers, not conversions. Since the rollover is t-to-t it complies with the 60 day time frame and is reportable, not taxable.

For a conversion the investment house will issue it as Code 1 or Code 7. If it is Code 1 for being under age 59 1/2 the conversion checkbox will remove the 10% penalty since it does not apply.

Investment houses are notorious for screwing up the coding.

This transaction is to follow the facts. The rollover happened in 2020, the conversion happened in 2021.

...If you move money from your 401(k) plan to an IRA, that's a rollover. And a Roth conversion occurs when you change a traditional IRA to a Roth IRA. The distinction is important because the IRS treats these transactions differently for tax purposes.

N

NPChristyAuthor

Level 4

For 2021, in proseries, can I create a substitute 1099-R using the Roth IRA's fed ID code or do I have to fill out 4852 and attach?

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