Retirement tax questions

When reporting your conversion, you should enter the gross amount of $50,000.

The IRS treats this as a $50,000 distribution from your IRA, with $40,000 being rolled over into the Roth account and $10,000 being distributed to you to pay the taxes. Since the $10,000 withheld was not deposited into the Roth IRA, that amount is not a conversion, it is treated as a regular taxable withdrawal.