1099-Q box 6 question is worded very confusing

[gjoly]

the step-by-step form for the 1099-Q brings you to Box 6. The question is worded twice. Once where you would answer Yes. And once where you would answer No.

=======================
Box 6: Is the recipient of the distribution the designated beneficiary?
Recipient is not designated beneficiary
Yes

No

=======================

If I focus on the first question, the answer is Yes. But choosing Yes, results in Box 6 in form 1099-Q being checked which is the wrong result.
If I focus on the second statement, the answer is No (this is a double negative and is a very poor way to phrase a question/statement). However, if I do answer No, then the Box 6 in form 1099-Q is not checked, which is the correct result.

Turbotax team--Please fix this so the language is not confusing. 

Finally, please fix the QTP to Roth IRA box so that it properly works soon.

Thanks!

[JFW3]

100% agree.  I have the same questions.  A QTP-to-Roth transfer shouldn't increase your taxable earnings, but TT may not want to assume that, since there are likely situations where a QTP-to-Roth transfer doesn't qualify under the rules.  For example, if you transfer more than $35,000 over a lifetime.  They may tell us not to input the 1099-Q, which was the answer last year.  Box 6 is terribly worded.  They need to follow the 1099-Q -- but wonder how the answer is programmed into TT.

[DaveF1006]

 Here are some suggestions to consider with the entry of the 1099 R.

1.  You want Box 6 on the generated form to be unchecked (assuming the recipient is the beneficiary). 
2. Even though the first question asks if the recipient is the beneficiary, the software is actually looking for the trigger for the Form 1099-Q instruction for Box 6, which says: "Check if the recipient is NOT the designated beneficiary." * Action: Answer "No" to the prompt. This signals the software not to check the "Not the beneficiary" box.
3.  If the 1099-Q was issued in your child's name (the student) and they used it for qualified expenses,  don't enter the   1099-Q at all. IRS Publication 970 explicitly states that if the distribution is non-taxable (used for qualified expenses), it does not need to be reported on the return. This avoids ‌the software confusion entirely.

The 529-to-Roth rollover is a relatively new provision and here some recommended steps for that.

1. The IRS Stance: According to IRS Publication 970, qualified rollovers are not reported on your tax return. They are non-taxable events. 
2. The Problem: If you enter the 1099-Q for the rollover, TurboTax currently tries to tax it because it doesn't have a "This was a Roth rollover" checkbox yet.
3. The Current Workaround: 1. Do not enter the 1099-Q for the rollover portion into TurboTax. 2. Keep the 1099-Q and your proof of the "trustee-to-trustee" transfer in your records. 3. If the beneficiary makes money and you want to track it, you can add it to the Roth contribution in the Deductions & Credits section. Make sure the total (rollover + any other contributions) is not more than the annual limit ($7,000 for 2025).

[user17712776278]

Agreed that TurboTax is very confusing on this aspect.

It would be much better for Turbo Tax to just ask "Is box 6 of the 1099-Q checked?"

[JFW3]

Yes!!  Not to mention a whole lot simpler in wording and straightforward.  

[gjoly]

this worked last year but they changed the form just a bit by adding the extra box but the rollover from 529 to Roth has been there for a couple of years now. So what I am rather disappointed by is that this is taking Intuit/TurboTax so long to fix and update in the program.  This should be a continuation of the same logic as before. If they want to add a few other questions, then that should be something that should have been completed by now.

Intuit: When will you have the 1099-Q correctly updated so that a rollover from a 529 to a Roth will be understood by the program and it is not to be considered taxable income?

[KrisD15]

It is my understanding that a concern has been submitted and an update is expected. 

Until then, the following steps can be used to enter an approved 529 Account to Roth Rollover. 

The rollover must have been done in a Trustee to Trustee manner to ensure that the requirements were met, such as the account being established for at least 15 years:

To enter a 529 Savings Account Rollover to Roth using TurboTax Tax Year 2025

Be sure to enter your income first. Contributing to a Roth Account, including Rollovers, requires meeting the general rules and limits of a yearly Roth Contribution. This means you must have earned income in the amount of, or higher, than the 529 to Roth rollover.

• Go to the Federal Taxes Section of TurboTax
  Wages & Income
  Less Common Income
  Miscellaneous Income, 1099-A, 1099-C   START or UPDATE
  Scroll down and select “ESA and 529 Distributions (Form 1099-Q)"    START or UPDATE
• Form 1099-Q   “Did you receive a Form 1099-Q for qualified tuition program distributions in 2025?”
  Yes      Continue
  1099-Q distribution   “Who received the 1099-Q distribution?”
  Taxpayer    or Dependent (SELECT THE BENEFICIARY of the 529 account, NOT THE OWNER)   Continue
  Designated beneficiary for this 1099-Q   “Tell us the student whose education expenses were paid by the distribution reported on this 1099-Q” 
  Taxpayer or Dependent (SELECT THE BENEFICIARY of the 529 account, NOT THE OWNER)  Continue
• Enter Form 1099-Q
• Distribution code should be “Distributions”
  Continue
• Distribution information   “Enter the distribution amounts as shown on Form 1099-Q. The gross distribution must equal the sum of the earnings and basis amounts” 
  Enter the amounts. If the program shows an error, the program may be rounding both earnings and basis up or down, if so, change the earnings to be one dollar higher or lower so the earnings and basis added together equals the distribution.
• 
  Other Form 1099-Q information
  Follow your 1099-Q
  Box 4a should be checked so select “Yes” for Box 4a
  Box 4b should not be checked, so select “No” for Box 4b
  Box 6, if that is checked on your 1099-Q select “Yes” if it is not checked, select “No”
• Continue
• Death or disability
  “Was this distribution received because the beneficiary dies or became disabled?”
  Select “No” to both
  Continue
• Qualified tuition program
  “What type of qualified program was the distribution made from?”
  Select Coverdell ESA
  Continue
• Coverdell ESA
  Enter the basis (the balance of YOUR contributions) before the distribution (December 31, 2024) 
  Enter any contributions made to the 529 in 2025, this most probably should be zero
  Enter the total balance of the 529 Account at the end of 2025. 
  Continue
• Return of contribution     “Was this distribution a return of contribution to a Coverdell ESA?”
  Select “Not applicable” 
  Continue
• Distribution Transfer
  Select “No”     
  Continue
• Rollover
  Select “No”
• Refund of education expenses
  Select “No”
  Continue
• Form 1099-Q summary
  Here you should see a list of the 1099-Q with the amount in Box 1 for the Roth transfer which should be under the limit for 2025 of 7,000 for taxpayers under age 50.
• Student information summary
  Here the beneficiary’s name should be listed
  Select Continue

If you also have Form 1098-T or additional expenses relating to the student (BUT NOT THE 1099-Q FOR THE ROTH ROLLOVER) please go to 
Deductions & Credits
Education 
Expenses and Scholarships (Form 1098-T)   
 

[gjoly]

actually, box 4a is not checked and 4b is checked on the 1099-Q which is accurate from the form received from the 529 plan. There is an error in TurboTax that says that an update is coming--it flags during the check of your taxes. Changing this to 4a checked is inaccurate given that the QTP to 529 box is now available. Trustee to trustee worked last year just fine but it is not appropriate for this year.  When I go to the worksheet and click on 1a and 3a, then the $7000 rollover is removed from the income and the tax amounts are updated. This is the part of the issue that is STILL waiting on the update from Intuit. 
The way the questions are worded in TurboTax are different from the way they are worded on the federal tax worksheet:

Example:
This distribution was solely for a rollover, NO educational expenses involved.  They way that Turbotax words the question, implies I should answer Not applicable because there were no educational expenses paid for with this distribution.  However, based on the Tax form worksheet I would choose taxpayer.

Question wording and phrasing matters and it appears that Intuit has gotten a bit lazy (or are using AI) in their wording of questions.

Turbotax question--
Tell us the student whose education expenses were paid by the distribution reported on this 1099-Q.  Taxpayer, Someone else, Not applicable

Tax form question:
Who was the designated beneficiary of the distribution reported on form 1099-Q?
Taxpayer, spouse, dependent, someone else, not applicable. 

[KrisD15]

If Box 4b is checked, and you prefer to wait for the update, I understand that will be available soon. 

[gjoly]

Still getting this error above during the check that the program has not been updated yet. This is getting rather annoying. Trying to kludge a solution using trustee to trustee and hoping you don't get audited is not acceptable and shouldn't be expected. Again, this basic setup worked last year and the rules have not changed they just split moving 529 to 529 and 529 rollover to Roth. It is past time that the program is fixed and released to the customers. This delay along with the removal of ItsDeductible might be just the reason I look elsewhere for tax software next year.

[MarilynG1]

A qualified rollover from a 529 to a Roth IRA does not need to be reported in your return, particularly if the Roth IRA is for the beneficiary and not the recipient of the 1099-Q.  Your Form 5498 and the 1099-Q are sufficient to keep for your records.  You may also receive a 1099-R from the 529 Plan Administrator documenting the rollover, which the beneficiary can enter in their return, if they are required to file.

Here's more info from IRS Pub. 970.

@gjoly 

[gjoly]

Yes, this is helpful but let's be clear. People like myself use TurboTax because it walks us through these scenarios, helps up fill out the worksheets and helps determine what is or is not part of our income.
The 1099-Q was sent to my daughter who is the beneficiary of the the 529 and is the recipient of that rollover.

 When we walk through the step-by-step of TurboTax, it asks--Did you receive a 1099-Q? We answer YES.
Then we fill information and answer the questions and the worksheet should through the responses we provide based on the QTP-to-Roth box and other responses, determine that the income should not be included.   We fill this information out in TurboTax so we ensure we do not miss anything and expect the tool to do the job we purchased it for to guide us to indicate that it is not necessary to list this as income.

So while your are quoting proper information about taxes, and she could just avoid answering YES to the 1099-Q question, we would actually expect that TurboTax would allow her to answer this information so that I have a secondary record that shows that she answered and provided this information, that the tax check before filing will validate that there are no errors and she can submit her taxes knowing she has put this information into the worksheet, TurboTax validated that it was not considered income, and the information would be there if an audit were ever done (because then it would be there for the audit defense).

What I am asking for is that Intuit get this addressed ASAP. It is a tool issue that needs to be resolved and should be resolved so that taxpayers using their tool do not have to kludge the information to get their taxes filed.

[JFW3]

I agree completely gjoly.  This is the second year that TurboTax's answer was not to enter the 1099-Q form if you determine that the 529-to-Roth rollover is not taxable, with the quote from the form.  But TurboTax could easily be programmed to accept all 1099-Qs and then follow up with a questionnaire for TT to determine whether it is taxable.  I don't think too many TT users want to read the tax code, and we don't like ignoring 1099 forms either. I know ignoring the form gets us the right answer, but that's not what we buy TurboTax for.  As I suggested in another thread, if TT doesn't want to develop a questionnaire with logic to determine whether the distribution is taxable, at least allow the user to enter the form and indicate whether the distribution is taxable.

[user17712776278]

This is likely the last year I use TurboTax.

I spent over an hour on the phone with the extra upcharge for phone/online support and they were astonished as I was at the end once they understood the tax code. They added in 2nd line support that asked to falsify items from the forms to see if it would change how turbo tax treats the secure act 2 rollover. I had to educate them at each step on tax laws until eventually they agreed and said to just not enter it and agreed TurboTax was flawed. It's still flawed even today trying to tax me for the Roth contribution as our income is too high. Nowhere does it ask if the contribution was a qualifying 529 rollover. It's crazy that two years since secure act 2 that turbotax doesn't walk people through this correctly and likely causing a high amount of people to over pay taxes. It's unexcusable.

[user17712776278]

Still no update. Likely the last year I'll use TurboTax after 15+ years and even paying upcharges for support this year that took over an hour for them to understand the issue.

This should be so simple and such a priority to fix. Even entering the Roth contribution incorrectly increases taxes if your income is above the limit when performing a qualifying 529 rollover. 

They refunded purchases for Oregon filers a year or two ago for incorrect filing issues, they should do the same for this. Many people who rely on the question walk through could be paying taxes above the required amount.