Background:
I changed jobs in early 2017, and within a 60 day window I opted to roll my company 401(k) over to a traditional IRA with Vanguard. It was all in a Vanguard index fund already, but the lower-cost Admiral shares were not available in the plan, so rolling them over enabled me to get the lower MER (why I bothered to do it). It was all pre-tax money, rolled into a Qualified Retirement Plan, and therefore not taxable. Easy.
Here's where it gets odd. I wasn't really expecting to receive a 1099-R at all, so imagine my surprise when they sent me 2 of them! The first one described the rollover transaction for the full amount, OK, I understand that one. The second indicated that I had taken a distribution of $13.75 (matching the amount of a check they had sent me earlier in the year) which was fully taxable. The best I can figure, this represents an increase in value while the rollover transaction was taking place, since these transactions are not typically instantaneous. Is this plausible/common?
This tiny amount of money is causing me disproportionate issues while filing my taxes. Not only is this amount directly taxable, but because it is categorized as a distribution from a retirement plan, my tax software (TaxAct) is saying that I owe a 10% penalty on this amount for withdrawing early! If that wasn't enough, the forms I need to document all of this are not included in the basic package of TaxAct, so it wants to charge me another $30 to upgrade the software!
If this amount is actually what I think it is, shouldn't it be either capital gains, or else included in the other rollover transaction and therefore not taxable? It wasn't a distribution I elected to take, after all, and I am not sure how I should report it. Even though we're talking about an amount that is basically peanuts here, I'd rather do the right thing and not have the IRS think I'm trying to pull a fast one even though I feel this amount is incorrectly classified.
Does anyone have any suggestions for how to approach this problem, or have experience dealing with something similar? Should I just pay to upgrade my software and be done with this headache?