@ronroberts
Let me summarize how this works in Turbotax.
You contact the trustee of the pre-tax funds (IRA or 401k) and say, you want to do a $10,000 conversion to a Roth IRA, with $2200 (or 22%) withholding. Broker 1 sends $7800 to Broker 2 as a direct electronic transaction. Separately, you send $2200 to your Roth IRA at Broker 2 and tell them "this is also a Roth conversion." That's all you need to tell them. Broker 2 takes your word on it, they don't need to know more. (If you were lying, that's for the IRS to deal with, not the Roth IRA Broker.) You must deposit the money within 60 days of the direct transfer of the other part of the conversion, and be careful that you tell the plan in advance this is a rollover, so they don't accidentally record it as a regular contribution.
Then at tax time, you get 2 1099-R forms from Broker 1. One form says you converted $7800. You enter this in Turbotax and it goes through automatically. The second 1099-R says you withdrew $2200. Turbotax asks, what did you do with this money? and you check the box for "it was a Roth conversion."
That's it. Turbotax shows $10,000 converted and $2200 withheld, you get assessed the tax and credited with withholding, and the IRS does not issue a penalty because they see that the income and withholding match, and they don't consider the fact that the income and withholding occurred late in the year, because of how withholding is treated differently from estimated payments.
This will work for any size conversion, provided you can make up the withholding from other money and deposit it with the new Roth account within 60 days of the direct transfer.
Does that help?
