This Form 1099-R is reporting a Roth conversion from a traditional IRA to a Roth IRA. This indicates that the entire lump-sum distribution from the pension plan was rolled over to a traditional IRA and then a Roth conversion was performed on a portion of the amount in the traditional IRA. Unfortunately, because the after tax portion of the pension distribution was first rolled over to the traditional IRA, the nontaxable amount of the Roth conversion is in the same proportion as the after-tax basis is to the entire traditional IRA. This means that only some of your after-tax basis applies to the Roth conversion and the rest of your after-tax basis remains with your traditional IRAs to be applied proportionately to future traditional IRA distributions.
For the entire after-tax basis to have applied to the Roth conversion, the after-tax basis in the pension plan needed to be rolled over directly to the Roth IRA in a split rollover, not first rolled over to the traditional IRA and subsequently converted to Roth.
After entering the code-2 Form 1099-R, click the Continue button on the page that lists the Forms 1099-R that you entered. When TurboTax asks, indicate that you made and tracked nondeductible contributions to your traditional IRAs. on the next page, click the EasyGuide button. Mark the box to indicate that you transferred money from an employer's retirement plan in 2022 or a previous year, click Continue, then enter the amount of net after-tax basis that came from your pension plan. TurboTax will prompt you to enter an explanation of the amount of this after-tax basis and how it came to be in your traditional IRAs. TurboTax will include this amount on Form 8606 line 2 when calculating the taxable amount of your Roth conversion. On a page that follows, be sure to enter the total year-end value of your traditional IRAs.
