Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

Roth IRA distribution

Rightso
Level 1

A couple did a rollover of funds from their 401K to a Roth IRA account in 2020. The taxpayer passed away in 2021 leaving the spouse as sole beneficiary. They did not pay taxes on the rollover.  The spouse withdrew the whole funds from the Roth IRA  in 2021 and receive a 1099-R with code T. Does the spouse have to pay taxes on the withdrawal of the funds?

0 Cheers
6 Comments 6
Just-Lisa-Now-
Level 15
Level 15
so they didn't report the transaction on the 2020 return?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
abctax55
Level 15

Unless that 401K was a Roth 401K, the "rollover" was a taxable transaction.  How (if it was..) was it reported on the 2020 return?

"*******Tax software is no substitute for a professional tax preparer*******
( Generic Comment )"
Rightso
Level 1

no they did not

0 Cheers
Rightso
Level 1

they included it as a rollover that is a 1099-R with G code

0 Cheers
Rightso
Level 1

I am sorry they included conversion as a rollover 1099-R with code G

0 Cheers
qbteachmt
Level 15

"they included conversion as a rollover 1099-R with code G"

You are stating this as if these are synonyms.

Rollover is the movement of funds from one account/plan of a type to a similar type account/plan.

Conversion is the change of the funds, as a move from pre-tax and sheltered to tax-exempt. That would be a taxable event and that's why the term "Conversion" applies.

You stated the destination was Roth IRA. What you need to confirm is if the funds came from a Roth 401(k) or a Deemed Roth inside of a 401(k). Because if this is really what happened:

"from their 401K to a Roth IRA account"

Then the instructions were incorrect and someone overlooked that this was Conversion. For instance, using the word Rollover, and not Transfer, implies your client handled the funds in between. If so, and they had a distribution check handed to them from a 401(k), then handed it to a new brokerage to "open a Roth for me with my employer funds" then they stated it wrong, and that would explain why the 1099-R is not coded for what really happened.

The issuer of the 1099-R only knows what they knew for money Out.

The recipient of the funds for a conversion or rollover only knows what they know for money In.

And on either side of this, things still go wrong.

*******************************
"Level Up" is a gaming function, not a real life function.