401 Rollover to Roth

[Consultant]

401-K Direct transfer. 1099-R lists amount in Box 1, 0 in Box 2. Code is G for Rollover. Client states amount went to a Roth.
Form 8606 is confusing as to how to report. How does IRS know this is a conversion from the 1099-R?

[New York Enrolled Agent]

You don't say but was this a Roth 401K? Otherwise, I'm not sure if the 1099-R is correct using a zero in box 2. Perhaps the directions permit this but this a taxable event.

[Consultant]

It was a regular 401-K presumably to a ROTH

[kathyc2]

Code G with 0 taxable would indicate it went to a Traditional. Code G with taxable in Box 2 means converted to Roth and 8606 is not required.

Get paperwork from client showing where it was deposited and the type of account it is. Don't presume clients know what they did.

[rbynaker]

Good advice from Kathy.

I've found that these things mostly operate on the honor system at this point. The taxpayer tells the plan custodian what type of account the money is going to/coming from. There's no verification, they just go by what they were told. Often clients have no clue what they're doing and they provide incorrect information.

I miss the days when everything had to go through a Traditional IRA first. At least then we could follow the bouncing ball.

Rick

[Consultant]

THANKS a BUNCH

[DoubleO]

When TPs handles the transactions themselves, I find the transactions get royally messed up. They request the RO go to a Roth IRA, but then provide the account for a TIRA. Or vice-versa. They don’t realize TIRAs and RIRAs are separate and distinct accounts. But what do you do when client requests 401k distribution to RIRA, provides TIRA account, 1099Rs correctly issued for conversion ( See Kathy’s post). Payor thinks it went to RIRA. Once TP finds out the Roth rollover is taxable, wants to claim he really meant for distribution to go to TIRA. I know there are procs for corrections, but do I get to claim, “Yeah, I just checked the wrong box on the RO form,” when I find out I misunderstood the tax implications. Changing the distribution from one account to another is one thing, but changing the nature of the transaction is another. In the end, it’s going to be taxable sometime.