Roth IRA conversion from pre-tax and Roth 401(k)

[Guest Quacka]

I converted my account balance in prior employer's 401(k) to a Roth IRA on January 4, 2010. My 401(k) account included both pre-tax and Roth contributions, and I received a distribution summary at the time of conversion. I downloaded the Forms 1099-R from Fidelity a few weeks ago.

The distribution summary tax information shows the following as of the conversion date:

Roth contributions, not adjusted for earnings - $42,205.00

Roth earnings - $2,689.83

Pre-tax contributions, adjusted for earnings - $14,782.99

Employer match on Roth and pre-tax, adjusted for earnings - $2,874.84

Form 1099-R #1

Box 1 - $44,894.83 ($42,205.00 + $2,689.83)

Box 2a - $0

Box 5 - $42,205.00

Box 7 - Code H

Form 1099-R #2

Box 1 - $17,657.83 ($14,782.99 + $2,874.84)

Box 2a - $17,657.83

Box 5 - $0

Box 7 - Code G

Should Fidelity have included the Roth earnings in box 2a of Form 1099-R #1? What are you seeing with your clients?

[Guest Quacka]

Ok, I just thought of something...Roth earnings are not supposed to be currently taxable, right? But the distribution summary tax information says "taxable amount" next to the Roth earnings! (?)

I understand why you would track the Roth earnings separately...those earnings would be taxable if you took a nonqualified distribution. But the "taxable amount" phrase has me confused.

[Guest Quacka]

Anyone....? Bueller?

Well, having given it some thought, I am pretty comfortable now that the Roth earnings should not be a taxable part of the conversion. Time to file...