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IRA rollovers

Forum|Forum|5 years ago
March 2, 2021
2 replies
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In 2020 we rolled over a sum from a traditional IRA to a Roth IRA. TurboTax insists that we do not pay tax on the rollover. This does not make sense to me. I do not understand how to re-enter the 1099-R so that tax is paid.

TurboTax Basic Windows

Best answer by dmertz

I think I see the issue. Even though a Roth conversion is treated in the tax code as a taxable rollover, in TurboTax you must explicitly report it as a Roth conversion and not as a rollover. If TurboTax does not provide the selection to indicate that you converted the entire amount to Roth (some versions do not), indicate that you did a combination of rolling over, converting and cashing out, then indicate the amount that was converted to Roth. This distinction is necessary because nothing on a Form 1099-R for a distribution from a traditional IRA indicates what you did with the money.

D

dmertz

Employee

Code 2 means that you are not subject to an "additional" tax, a 10% early-distribution excise tax (penalty). This is what TurboTax is telling you. TurboTax is not telling you that the distribution is not subject to income tax.

Check Form 1040 line 4b to see that the Roth conversion is being included in taxable income.

M

mikekathyAuthor

Above is the TurboTax message. The rollover is definitely not included in the tax calculation.

D

dmertzAnswer

Employee

I think I see the issue. Even though a Roth conversion is treated in the tax code as a taxable rollover, in TurboTax you must explicitly report it as a Roth conversion and not as a rollover. If TurboTax does not provide the selection to indicate that you converted the entire amount to Roth (some versions do not), indicate that you did a combination of rolling over, converting and cashing out, then indicate the amount that was converted to Roth. This distinction is necessary because nothing on a Form 1099-R for a distribution from a traditional IRA indicates what you did with the money.

H

h-poch1

Where did I enter a rollover of the 1099

J

JotikaT2

Box 7 of your 1099-R form would be marked as a rollover. (Code G or H).

You can go back to review your input in the Federal interview section as follows:

Select Income & Expenses
Scroll down to All Income
Select show more to the right of Retirement Plans & Social Security
Select start/revisit to the right of IRA, 401(k), Pension Plan Withdrawals (1099-R)