Rolled over 401k to IRA and now TurboTax says I owe taxes. What's happening?

You're right to question this. Direct rollovers from a 401k to an IRA shouldn't trigger any tax liability when done correctly. The key is in box 7 of your 1099-R form - this code tells the IRS what type of distribution occurred. For a direct rollover from a traditional 401k to a traditional IRA, you should see code "G" in box 7. This tells the IRS it was a direct rollover to a qualified plan and not taxable. For the Roth portion, you might see code "H" which indicates a direct rollover to a designated Roth account. When entering this into TurboTax, there should be a section where you can indicate this was a rollover. Sometimes tax software initially treats all distributions as taxable until you specify the rollover status. Double-check that you've answered all questions about this distribution correctly in TurboTax. If your 1099-R has a different code (like code "1" which means early distribution), that could explain why you're seeing taxes due. In that case, you'd need to contact the plan administrator to request a corrected 1099-R.

After dealing with a similar headache last year, I finally found taxr.ai (https://taxr.ai) and it saved me hours of frustration! I uploaded my 1099-R and other tax docs, and it immediately flagged the incorrect distribution code issue. Their AI analyzed all my forms and showed me exactly what was wrong with my rollover reporting. The system explained that direct rollovers need specific codes (like code G) on the 1099-R, and mine was incorrectly coded as a normal distribution. It even generated a sample letter I could send to my plan administrator requesting a corrected form. The best part was how it explained everything in normal human language instead of confusing tax jargon.

I was super skeptical about AI tax tools after getting burned by another service, but I tried taxr.ai out of desperation when dealing with my botched 401k rollover. Honestly blown away by how helpful it was! The system immediately found that my plan administrator had coded my direct rollover as a regular distribution (wrong code in box 7). It explained exactly what should have been there instead and created a correction request letter that I just had to sign and send. When I got the corrected 1099-R and resubmitted to my tax software, my "tax bill" completely disappeared! Would have spent weeks figuring this out on my own. Their document analysis is scary accurate - it even caught a small reporting error on another form I hadn't noticed.

After spending 4 HOURS on hold with my 401k provider about my rollover issue, I finally tried Claimyr (https://claimyr.com) and it was a complete game-changer. They got me connected to an actual human at my 401k company in under 20 minutes! I explained the issue with my 1099-R having the wrong distribution code, and they were able to start the correction process right away. If you're dreading making that call to fix your rollover paperwork, definitely check out their demo video: https://youtu.be/_kiP6q8DX5c. They basically call and navigate all those annoying phone trees and hold times for you, then call you once they get a human on the line. I was seriously about to give up before finding this service.

I take it all back! After reading about Claimyr here, I tried it yesterday to deal with my 401k administrator about my incorrect 1099-R. I was absolutely convinced it wouldn't work, especially since I'd already wasted THREE separate afternoons trying to get through myself. Shockingly, they got me connected to an actual human at my 401k company in about 25 minutes! I would have been on hold for hours otherwise. The representative was able to verify that yes, my rollover was coded incorrectly on the 1099-R and started the process to issue a corrected form with the proper "G" code. For anyone dealing with these rollover tax headaches, being able to actually speak to someone without wasting your entire day is worth its weight in gold. I'm still shocked it actually worked!

Make sure you're also checking box 2a on your 1099-R. If the "Taxable amount" field shows your entire distribution as taxable when it shouldn't be, that's another red flag that the form is incorrect. For a direct rollover, box 2a should typically show $0 as the taxable amount, and the "Taxable amount not determined" box might be checked. Another possibility: did you do the rollover within 60 days of receiving the distribution? If there was any delay beyond that window, it could be considered a taxable distribution rather than a rollover.

I had EXACTLY this problem last year! The 401k company messed up the code on my 1099-R and it showed as a regular distribution instead of a rollover. When I called, they tried to tell me it was correct, but I insisted they transfer me to someone in their tax department. The key was having them confirm that they sent the money DIRECTLY to my new IRA custodian. Once they verified that in their records, they had to admit it was coded wrong and issued a corrected 1099-R with code G. Until you get the corrected form, don't file your taxes if possible! It's much easier than having to file an amended return later.