Q. Since the 529 to Roth is a new program is it obvious in TurboTax how to account for this?
A. No. And they only recently discovered that it doesn't. They're working on it.
In the mean time, I believe this statement still applies:
Just don't enter the 1099-Q in TurboTax. When the box 1 amount on form 1099-Q is fully covered by expenses, or ROLLED OVER to another qualified account, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records (the work sheet isn't going to tell you anything that will help with an IRS inquiry).
References:
- On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
- IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.
But, you need to be sure that you meet all the new rules:
- $7000 yearly limit
- Your 529 savings account must be open for over 15 years before funds can be rolled over into a Roth IRA.
- It must be a trustee to trustee rollover (the trustee to trustee rollover box will be checked on the 1099-Q)
-
the Roth IRA must be in the beneficiary’s name
-
529 contributions made within the preceding five years cannot be rolled over.
-
Beneficiary must have earned income that year of at least the amount transferred
-
$35K lifetime maximum (2024 is the 1st year that the Roth rollover is allowed, so this isn't an issue yet)
