Question

Conversion of long-existing SEP IRA to Roth

Forum|Forum|3 years ago
March 19, 2023
2 replies
0 views

I've seen a how-to for entering the conversion of a traditional IRA immediately to a Roth (i.e., a backdoor conversion), but I need help ensuring that I can enter the conversion of a long-existing SEP IRA (containing only pre-tax (i.e., deductible) contributions) to a Roth IRA.

How do I enter it? I know I will pay taxes on the entire converted amount.

TY

TurboTax Home & Biz Windows

A

AnnetteB6

It should just be a matter of entering the Form 1099-R that will be generated when you take the distribution from the SEP-IRA and convert the funds to a Roth IRA.

After you enter Form 1099-R, there will be follow-up questions asking what you did with the money. As part of those questions, you will indicate that it was converted to a Roth IRA. You should also be asked about the basis (non-deductible contributions) of the SEP-IRA since that will determine the amount that will be included as taxable income for the conversion. Since your basis will be zero, the entire conversion will be taxable.

If you run into any difficulty or have further questions, you can always post them here for some help.

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M

mtg1909Author

Thanks!

M

mtg1909Author

Follow-up question:

I do not need to enter anything from the associated Form 5498 concerning the Roth IRA conversion amount, which matches the gross distribution/taxable amount from the Form 1099-R, correct?

W

wzetzman

I believe I have filled in all the 1099R information correctly. I know I will be charged the taxes on the conversion. How do I eliminate the 10% penalty that is automatically computed?

D

DanaB27

If the full amount was converted then you shouldn't get the 10% penalty calculated. Did you have any taxes withheld?

If you had taxes withheld and didn't replace the funds with other money to make a full conversion then this is considered to be a cash distribution and subject to the 10% early withdrawal penalty if you are under 59 1/2.

To enter the 1099-R conversion:

Click "Federal Taxes" on the top and select "Wages & Income"
Click "I'll choose what to work on"
Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)"
Answer "Yes" to the question "Did You Have Any of These Types of Income?"
Click "I'll Type it Myself"
Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
Click "Continue" and enter the information from your 1099-R
Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
Continue through the questions.