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Got a 1099-R for Rollover??

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  • Got a 1099-R for Rollover??

    Hello all, need some help now that tax forms are coming in.

    This year I switched jobs and after some discussions on this forum, was advised to rollover all old employer pre-tax retirement to Rollover IRA instead of to the new employer for greater investment flexibility.

    Here's what I rolled over in 2017:

    403b: 36200
    457b: 41300
    401a: 33321
    Of note, $7,700 of the 401a account was After-tax contributions, so was moved to a new ROTH IRA account (basically a mega back door roth that I didn't max out).

    I received a 1099-R today from Fidelity for the distribution from the 401a.  Box 1 shows a distribution of $33321.  Box 2a (Taxable amount) reads $0.00.

    This may seem like a dumb question, but I'm not going to have to pay taxes on this distribution, correct?  I'm hoping the $0.00 taxable amount is what that truly means and that the $33321 is still pre-tax and deferred until I take it out.  I was under the impression that rolling over all this old employer money was not going to be taxed and stay in tax-deferred status (with the exception of the $7,700 that has already been taxed and now resides in a Roth account).

    Since I've never dealt with 1099-R forms in the past, just want to verify that I'm in the clear and now going to all of a sudden be on the hook for $12k in taxes...

     

  • #2


    Box 2a (Taxable amount) reads $0.00.
    Click to expand...


    There you go.

    They give a 1099-R anytime anything comes out of an account.  Sometimes even if 2a has a number in it, it's still not taxable as is the case of a conversion of a non-deductible contribution with no pro rata taxation (such as a properly-done backdoor Roth), and the "not determined" box in 2b is checked.


    This year I switched jobs and after some discussions on this forum, was advised to rollover all old employer pre-tax retirement to Rollover IRA instead of to the new employer for greater investment flexibility.
    Click to expand...


    Who told you that?  In a vacuum, that's not a bad idea, but I hope you're not planning on doing a Backdoor Roth IRA, because now you've got a hefty sum of pretax IRA that would case pro-rata taxation of conversion of non-deductible contributions.  If you want to do that, which one generally should, you'll now need to find a pretax qualified plan like a 401(k) that accepts incoming rollovers to "open the backdoor," so to speak.

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    • #3
      Yes, you are absolutely right.  I discovered the backdoor pro-rata problem after the fact.  So it leaves me with a few options:

      1) move all this money over to my new employer and have it invested in one of a limited number of funds/investment options, thus re-opening my option for annual back door Roth and not taking the pro-rata hit

      2) leave the money in my own Rollover IRA to invest how I would like, and instead of back-door converting every year, I just make a Traditional IRA contribution instead.  This option isn't too tragic, because I still have a mega-back door option through my employer, so I'm still getting an extra ~$20k into my other Roth each year already.

      I guess the ultimate question is whether the increased flexibility of the Rollover IRA will yield a big enough difference from the employer investment options to warrant foregoing tax free investing on $5500 each year...

      the other unknown and unpredictable variable really is for how much longer is the back door roth going to be an option if the government decides to do away with it...

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