dmertz
Level 15

Retirement tax questions

In the language of the tax code, the term "conversion" is only used for moving money from a traditional IRA to a Roth IRA.  Any movement from a traditional account in a qualified retirement plan like a 401(k) to a Roth account, either in-plan or to a Roth IRA, is a technically a rollover, not a conversion.  The result is essentially the same, but the legal jargon differs.

 

Because the result is essentially the same, TurboTax tends to refer to any of these types of movement of funds from a traditional account to a Roth account as a "conversion" even though that is technically a misuse of the term in the case were the distributing account is a traditional account in a qualified retirement plan.  In answers that I provide, I try to used the correct legal terminology rather than common misusage, except in cases where I'm referring to specific text in TurboTax.

 

Any movement of funds from the any account in the 401(k), including an In-Plan Roth Rollover, constitutes a reportable distribution for which the plan is required to issue a Form 1099-R for the year in which the distribution occurs.  The "I need to prepare a substitute 1099-R" box is on the page where you identify the type of 1099-R you are entering.