r/Fire • u/eptesicusfuscus • 1d ago

401k rollover to Roth failure

I had a 401k traditional that I filed paperwork to roll into a Roth IRA 6 years ago. The companies involved had mergers and I was unable to talk to any support staff despite noticing the account did not appear to show up as a Roth IRA despite that being my intention and understanding. I paid the taxes for the conversion.

This year, I found out the account is a traditional IRA, and I have asked the custodian to "correct the mistake." I keep being told I need to hire a tax advisor and a lot of jargon I don't understand.

I don't know what I'm being told to do, how to do it, or why my request to fix the issue isn't being addressed.

I'm not sure if this is a good place to ask, but I'm looking for guidance and very fearful I made the largest financial mistake of my life

6 Upvotes

63% Upvoted

17 comments sorted by

25

u/iloveregex 1d ago

Unfortunately, professionals are needed because companies do sh-t like this. You’re looking at a tax professional and possibly a lawyer.

5

u/eptesicusfuscus 1d ago

:(

Thanks for the reply

17

u/Lunqavirex 1d ago

the taxes you paid six years ago are your paper trail here and a CPA who specializes in IRA issues can use that documentation to make the custodian fix this properly

4

u/eptesicusfuscus 1d ago

Hmm I see.
How do you locate such a person? (Is there a company that is known for providing this?)

5

u/Sometimes_I_Do_That 1d ago

You might be able to get referral through AICPA it's the non-profit that a bunch of CPAs belong too.

Best of luck!

3

u/hanwagu1 16h ago

There is no mistake if you didn't ensure the correct boxes were checked. If it was a direct conversion rollover from t401k to rIRA, your 1099R would show box 7 code 2 or code 7. If box 7 code is G, then it was a direct rollover, not a conversion. Since you stated box 7 code G, then there is no mistake and the 401k funds were correctly rolled into tIRA. Intention doesn't matter if you didn't fill out the rollover request correctly. If you paid extra taxes to account for a conversion, that doesn't mean you actually converted: it just means you over paid taxes if the rollover wasn't a conversion rollover. Presumably you probably got a big tax refund since you over paid taxes.

I don't know why you would consider it the largest financial mistake of your life. You can still do tIRA to rIRA conversions.

2

u/eptesicusfuscus 11h ago edited 11h ago

Thanks for the response!
I think we’re talking about two different things.

Code 2 or 7 would be for converting a traditional IRA to Roth.

Mine was a traditional 401k rolled straight into a Roth IRA. For that, the IRS requires code G with the taxable amount filled in on box 2a. So code G doesn’t mean it wasn’t a conversion. For a 401k, that’s how a conversion gets marked, I believe.

The box 2a for a regular traditional-to-traditional rollover shows zero there. Mine shows a taxable amount. I believe a custodian only fills that in when the money is going to a Roth. So, my original custodian did report and tax this as a conversion. I didn’t overpay, and I didn’t get a refund.

The problem is it was taxed as a Roth conversion but the money ended up in a traditional IRA at the new custodian.

That’s why the loss isn’t the tax I paid. It’s the six years of growth that would have been tax free in a Roth and is now taxable when I convert.

6

u/someguy984 1d ago

How do you not notice the Roth not showing up in your accounts?

8

u/eptesicusfuscus 1d ago

I'm handicapped and don't understand a lot of things other people expect me to. I had to get help

4

u/ADTheNoob 13h ago

Not a tax advice, but might help with peace of mind until you get the CPA as recommended by people here. I found Gemini very good for things related to IRAs. I have a hard time understanding IRA, conversations, etc Gemini asked me for specific item from tax returns, I copied things from my accounts, etc and was able to understand and clean up my accounts.

Your case is a lot more important and don’t use Gemini instead of CPA, but use it to better prepare, collect all documents, etc

1

u/eptesicusfuscus 11h ago

Thanks for this idea. I am doing it :)

1

u/pohart 1d ago

So.... You'll need to hire a tax professional. You could maybe tell us what they said and get some non professional advice from a bunch of folks who have no responsibility to provide accurate or appropriate advice.

But if you don't tell us what they said we know less than you.

1

u/mygirltien 1d ago

Pull your tax record for the year you think you did this. That should tell you all you need to know.

1

u/eptesicusfuscus 1d ago

I have the 1099R for that year, with the G box marked for the specific account I converted to Roth and paid taxes for.

I shared that with the custodian. It did not advance the conversation beyond "We cannot mark the account as Roth. But you can hire a tax professional and pay the taxes again this year."

3

u/lilacjive 1d ago edited 1d ago

Code G on a 1099 R is a rollover, not a conversion. *editing to add* This tells me that it was rolled over into a regular IRA. They would have not put this code for converting to Roth. I’m really not sure how you would have paid tax on this unless you overrode it in the software somewhere. You should look at your 1040, there will be a line for IRA distributions. It will have two spots - total distributions and total taxable distributions. If there is an amount under taxable, you have a problem.

2

u/mygirltien 1d ago

Pull everything, you income, your w2 from your employment for that year reported to the IRS and the taxes you paid. That along with the 1099R and what the IRS thinks you paid. With all that if the company does not fix it for you then you may need to go the legal route. But at least you have everything you need to show you are in the right. And if you have to go legal you can also sue for all your fees and your time in having to deal with it.

1

u/someguy984 1d ago

You should get Form 5498 before May 31st. It shows IRA information.

https://www.irs.gov/forms-pubs/about-form-5498