Q. Can someone from Turbo tax escalate this issue as a high priority item and provide proper resolution with software update vs. giving some answers which does not make sense (garbage answers) ?
A. No.
You've got your answer. You treat it as a rollover or you just don't enter it. You have to verify, by yourself, that you qualify, as there is no qualifying TT interview.
The TurboTax interview doesn't directly cover this, yet (there is a workaround). They're working on it, but it will not be ready for this tax season. In the meantime, 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 (including a Roth IRA), 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). You'll need to check the "trustee to trustee rollover" box at the 1099-Q screen.
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
- Beneficiary must have earned income that year of at least the amount transferred
- Your 529 savings account must have been 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
- $35K lifetime maximum (2024 is the 1st year that the Roth rollover is allowed, so this isn't an issue yet)
