Here is what I found out last year...
Yes, when you enter the data on the federal form (1099-R) for a traditional to Roth conversion, it will compute the federal taxes correctly, however, the taxable amount you convert AND the amount you roll-over to a Roth are both imported into the State (Alabama) tax form as reported income, thereby doubling the amount. You need to go to your State Tax section and under menu selection of Income, then Retirement Distributions, it will take you to a screen that says that “Some or All of Your Distribution is Taxable”. Both blocks may be filled in due to you answering the 1099-R questions on your federal return. However, it is a one “OR" the other option, and you need to manually decide which one is more appropriate for your situation. By deleting the value in one of these blocks, your State Income should now be correct.
You should be able to modify your State return this way although I don't think you can access this through the "Easy Step" process. You will have to access the AL portion through the "Forms" icon and then go to the "Pen Excl Wks" under the "AL Forms" pull-down. You should be able to modify this manually from here so your rollover is not being double counted. Good Luck!
