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1099-R rollover from CARES Act is taxed when my spouse is selected

Forum|Forum|5 years ago
April 11, 2021
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I am filing my taxes as Married Filing Jointly and my wife and I each took a distribution from our 401K this year and immediately rolled them over into IRAs with our financial advisor. Some of the distribution was Roth, and other was traditional so we each have 3 different 1099-Rs (6 total). I noticed the ones for my wife were being taxed, but mine were not. I compared them and noticed no differences; by a whim, I changed the question, "This Form 1099-R belongs to" from her name to mine and Turbo Tax treated all of the same information as not taxable, when my name was selected. Her 3 forms are the only ones that are showing as taxable and I don't know why... Is there something else I need to check or is there an issue with the software?

Thank you in advance for your help!

TurboTax Premier Online

Best answer by dmertz

That's interesting that the forms are different for Spouse. The reason I selected COVID distribution is because my understanding from my financial advisor is that you cannot roll over a 401k if you are still employed with the company (which we both are) and the only reason we could initiate a rollover is because of the CARES Act and having been effected by COVID-19 financially allowed us to qualify.

I'm not sure if I would have any issued down the road if I don't select the COVID distribution as the reason for my wife, but at the same time, that CARES Act allowance was probably the only reason I could actually initiate a rollover from Fidelity and Vanguard so the hurdle is already passed. I'm definitely not paying taxes on a rollover that I did not convert to a Roth, haha.

"That's interesting that the forms are different for Spouse." They shouldn't be. The developers simply goofed.

Since you were not permitted to take an in-service distribution to do a rollover in the normal fashion, it might be appropriate to report each as cashed-out (not rolled over), then report each as a CRD and a repayment. That should cause your tax return to include Forms 8915-E for both you and your spouse showing zero taxable. That would alleviate your concerns that the distributions were only permitted as CRDs.

Note, however, that each of you is permitted a maximum of $100,000 of CRDs.

I'm puzzled why you each received three Forms 1099-R instead of just two. I would have expected just one from the traditional account and just one from the Roth account for each of you.

macuser_22

Employee

I suggest deleting the 3 1099-R's and enter only one and see what is on the 1040 line 5b. If there is a taxable amount then what code in in box 7 on the 1099-R and what is in box 2a and box 5?

You need to establish which one is causing the problem and the reason for it.

If you rolled a 401(k) to a Roth IRA then that is a taxable conversion, not a rollover.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

T

TaxPaul09Author

I deleted all 3 and then added one back to test it. You are correct that 1040 line 5b shows the taxable amount, only when my wife's name is selected - it does not appear when my name is selected.

Box 7 is distribution code 1 - Early distribution except Roth IRA, no known exception.

Box 2a shows the full amount that is in box 1, because this was a pre-tax 401k that was rolled into an IRA - no Roth conversion.

Box 5 shows 0.

I have the same exact layout for my 1099-R distribution code 1, except mine are through Vanguard and hers are through Fidelity, which shouldn't make any difference. What I find really odd, is that I can uncheck the box on the 1099-R that says "If Spouse's 1099-R, check this box" and Turbo Tax does not tax it...

Thank you for your advise, but still stuck paying tax on hers when I shouldn't be.

macuser_22

Employee

Then you did not answer the question yes to"Was is "moved" to another account" and then select that it was rolled over.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**