1099-R box 7 code G with IRA/SEP/Simple box checked. Roth IRA conversion

[blinkypanama]

My 1099-R from Fidelity has in box 7 code G and IRA/SEP/Simple box checked. In my particular case, I am converting to a ROTH IRA from a Rollover IRA. TT doesn't like the codes and says,

You indicated that you converted a traditional IRA to a Roth IRA with Code G in Box 7. However, if this is true it should have Code 1, 2, or 7 instead.

If the money you took out isn’t from a traditional IRA, then the IRA box should not be checked. 

So my question is, is the 1099-R I received incorrect? This was from Fidelity to another Trustee designated Roth IRA account.

[DanaB27]

Yes, if you are converting from a traditional IRA to Roth IRA then the code G in box 7 is not the correct code. 

[blinkypanama]

I just called Fidelity and they say the codes are correct for what they did. So, is there supposed to be another 1099-R that I should be getting for the conversion to a Roth IRA? The receiving company, iTrust capital, received the money directly into my ROTH IRA account as far as I know. iTrust capital has no available tax forms for me. From who should I be receiving the 1099-R Roth conversion form from?

[JohnB5677]

This is what TurboTax says under:

Double check Box 7 and the IRA box on your 1099-R

How will this impact my return?

The distribution codes and IRA box describe the type of distribution. The program relies on these codes to make correct calculations. 

The distribution codes are found in box 7 of Form 1099-R. The IRA/SEP/SIMPLE box is usually located right next to box 7. 

It’s important that the correct distribution codes are entered. If the codes on the form are incorrect, you should try to obtain a form with the correct codes from the payer. If you can’t get them, enter the codes which accurately describe the transaction. If you aren’t sure, then just report what’s on your 1099-R and we’ll continue with tailored follow-up questions. If you get new info, later on, come back to this section and enter the corrected info for this 1099-R

Log back into your 1099-R

1. Enter 7 in Box 7
2. Do you have info in Box 2a or Box 2b? = Yes/No
3. Do any of these situations apply to you? = None of these apply
4. How much of the $XX, XXX was an RMD? = None of this withdrawal was a RMD
5. Tell us if you moved the money through a rollover or conversion = I converted some or all of it to a Roth IRA
6. Continue the interview

[blinkypanama]

I cannot get a hold of iTrust capital. There is no phone customer support. They say they have no forms for me. My assumption of what happened: Fidelity did a rollover IRA to iTrust capital for which they gave me a 1099-R. It went directly into a Roth IRA at iTrust capital.  iTrust capital did not provide me with a 1099-R. I assume the conversion from a traditional IRA to a Roth IRA happened at the receiving company, iTrust capital? Does that sound right? So, what is my best course of action to make sure that I am taxed appropriately? I assume I should enter 2 in box 7 because it is a Roth IRA conversion. Also, I put the full amount in the 'taxable income' box so that it will bet taxed appropriately. How does all this sound?

[dmertz]

You did a conversion of the distribution from Fidelity.  Enter the Form 1099-R from Fidelity as received; do not change the code in box 7.  When entering the Form 1099-R from Fidelity, indicate that you moved the money to another retirement account, that you did a combination of rolling over, converting and cashing out, then enter the amount converted to Roth.

[blinkypanama]

why enter 7 in box 7? I am under 50 and am converting a rollover IRA to a Roth IRA. Wouldn't 2 be the correct code?

Also, should I put the full amount in the taxable income box? There is currently nothing in the taxable income box

[fanfare]

except for removal of earnings on an excess, the taxable amount is always zero for an IRA because the custodian does not know what you did or how many other IRA accounts you have.

That's why you have to answer the TurboTax questions as described above.

[LeonardS]

There are multiple codes for Box 7 that apply to Roth IRA distributions.  You should verify with Fidelity that they used the correct code and properly checked the IRA/SEP box.

This issue may not be resolved in time for you to file your taxes by the April 18, 2022 deadline.  You may want to consider filing an extension to file you’re your tax return.  This TurboTax link How do I file an IRS extension (Form 4868) in TurboTax Online? will assist you in filing an extension.

IRS extensions for tax year 2021 must be filed on or before April 18, 2022 for domestic taxpayers.

Keep in mind: An extension doesn't give you extra time to pay your taxes — but it will keep you from getting a late filing penalty.

@blinkypanama

[fanfare]

@LeonardS 

"You should verify with Fidelity"

OP has already done that .

[mkbca]

I also have a 100% conversion to Roth from traditional IRA in 2021and the 1099R from Schwab has distribution code 7 in box 7 and IRA/SEP/Simple box with an X. I have tried all the suggestions in this conversation but none increase my tax due as one might expect from such a conversion.  The explanations and suggestions are not working and TT (Premier for WIN) is not its usual logical self this year.

[fanfare]

@mkbca 

what is/was your prior years basis in all IRAs.?

[blinkypanama]

I have answered all the questions and even the one that asks if I converted all the money to a Roth IRA, yet it does not reduce my tax return as I would expect. Is there a reason it is not counting it as taxable income? I make enough to have to do a backdoor roth IRA (as a side note).