1099-Q QTP to Roth IRA roll-over is being taxed as income?

[robadele]

In the most recent update of turbo tax to handle 1099-Q form it now has new questions that match the 1099-Q. I made a 529 to Roth IRA roll-over in 2025 for an amount under the income and max limits. I received a 1099-Q for this transfer. When I enter the 1099-Q into turbotax and answer the question for box 4b as Yes a QTP to 529 transfer,  it is taxing the gain on the transferred amount as taxable regular income. This seems incorrect.  A roll-over within the required limits between a 529 and Roth should not be taxed as income.

[ReneV4]

It depends. Generally a rollover from a 529 plan to a Roth IRA is not taxable. However, there are certain requirements:

• The 529 plan must have been maintained for the designated beneficiary for at least 15 years
• Contributions made to the 529 plan within the last 5 years are not eligible
• The amount transferred from a 529 account to a Roth IRA in the applicable year, together with all other IRA contributions, must not exceed the Roth IRA annual contribution limit applicable to the beneficiary
• Certain states do not follow this rule, so you may be taxed on your state return

Learn more here: Qualified tuition program rollover to a Roth IRA 

[robadele]

Turbotax is not asking any of the questions you listed. However, I have met all those criteria. It is a Roth account open for more than 15 years. It is not money contributed in the last 5 years. My question, which has not been answered, is why is TurboTax not correctly computing this as non taxable. It appears this most recent release of TurboTax does not know how to correctly handle box 4b on the 1099-Q.

[DaveF1006]

It depends. If you have confirmed that your rollover meets the legal requirements ($7,000 max for 2025, account open 15+ years, earned income present), try this to see if it works.

1. Go back to the 1099-Q entry screen.
2. Even if your physical form only has 4b checked, try checking the box for "Trustee-to-Trustee Transfer" (Box 4a) as well in the software.
3. In the follow-up questions, look for a screen that asks, "Was this money moved to another qualified account?" Select Yes.
4. This often triggers the "nontaxable" flag that Box 4b is currently failing to trigger on its own.

If this doesn't work, do this.

1. Delete the 1099-Q from your return entirely.
2. Report the Roth Contribution: Go to Deductions & Credits > Traditional and Roth IRA Contributions and enter the amount as a Roth contribution.
3. The Result: Since the 529-to-Roth rollover is non-taxable, it shouldn't appear on your 1040. By deleting the 1099-Q, you remove the erroneous tax. Just keep the 1099-Q and your bank statements showing the direct transfer in your permanent tax file if you are asked to do so by the IRS.

[user17703293965]

When you follow the guidelines and enter accurately in 4b, it is still taxed, and it shouldn’t be. When will this be fixed??

[user17703293965]

In addition, when following the workarounds listed below in Turbotax, the tax problem gets fixed, but you cannot submit your taxes. Turbotax stops you,  claiming they are still waiting for an update. 

[rkonzmann]

This needs to be updated in Turbo Tax immediately.  It is incorrect.  The 2024 Form 1099-Q did not have an option in box 4 for QTP to Roth IRA.  It only had Trustee to Trustee transfer which is how a qualified transfer from a 529(b) plan to a Roth IRA was checked 2024 and it worked fine.  For 2025, the Form 1099-Q now has a new transfer option in Box 4 for QTP to Roth IRA.  It does not allow you to answer the questions to see if this a non-taxable distribution.  It is really unacceptable that Turbo Tax did not have this correct originally and still not corrected through updates as of Feb 9, 2026.  A fix by checking the box Trustee to Trustee in Turbo Tax instead of what is actually checked on the Form 1099 submitted to the IRS of QTP to Roth IRA is not really an option and just increases the risk that the filer is audited.  The law that was passed that allowed this non-taxable transfer from a 529(b) plan to a Roth IRA in 2022.  This is really unacceptable that Turbo Tax does not know how to handle it as of February 9, 2026 and makes me want to look into different software solutions in the future.

[DaveF1006]

Yes. You’re right—Form 1099-Q was updated for tax year 2025 to add new checkboxes in Box 4 (4a for Trustee-to-Trustee and 4b for QTP to Roth IRA). If the software doesn't recognize the new 4b option, it can make you feel like you're reporting the information wrong to the IRS. 

Because the software hasn't been fully patched to recognize the "QTP to Roth IRA" box as a valid non-taxable event, it sees the distribution as a standard withdrawal. Perhaps, here's some information that may ease your mind.

While it feels like you're "skipping" a form, it’s important to know the official IRS instruction for Form 1099-Q:

IRS Publication 970 & 1099-Q Instructions: "Nontaxable distributions from QTPs (529 plans) are not required to be reported on your income tax return. You only report the distribution if a portion of it is taxable".

If the transfer meets all the legal requirements (15-year account age, $35k lifetime limit, earned income match), the IRS literally does not want to see this on your 1040. With this said, delete the 1099Q completely. Instead,  Keep the 1099-Q and the confirmation from your Roth IRA provider (which will eventually issue a Form 5498 showing the rollover) in your tax records. If the IRS ever sends an automated letter (CP2000), you simply mail them the 1099-Q copy showing Box 4b was checked.

If you insist on entering it to "match" the 1099-Q in the system:

1. Check the box for "Trustee-to-Trustee transfer" in TurboTax.  Legally, a 529-to-Roth transfer is a specific type of trustee-to-trustee transfer. Checking this box tells the TurboTax "This money never passed through my hands, so it isn’t included as taxable income.
2. Audit Risk: The IRS receives Copy A of your 1099-Q. Their computers look to see if the earnings are reported as income on your 1040. By checking "Trustee-to-Trustee," you are correctly telling the software the distribution is non-taxable, which matches the IRS's own data for Box 4b.

I would recommend leaving the 1099Q out completely. 

[rkonzmann]

Thank you, this is very helpful.  Actually clicking "trustee to trustee" still results in it being taxable in TurboTax.  I now recall that I think I had the same issue last year when I checked "trustee to trustee" (the only option available) in TurboTax and I ended up just deleting it from TurboTax.  I will just delete the entire 1099-Q entry from Turbo Tax as you suggested again this year.  Still very frightening that TurboTax does not treat this properly, especially since this has been part of the tax code for at least two years now.  I wonder how many taxpayers just fill in the information into TurboTax from the tax forms they receive that can result in significant errors in their tax returns as a result of bad software.   Does anyone know if TurboTax actually reads these posts to fix these software errors?

[BogeyGolfer13]

Under SECURE ACT 2.0 a 529 Plan direct transfer to beneficiary ROTH IRA is allowed.  $7000 times 5 years for a total of $35,000. Are you saying that the State of Alaska (my 529 plan) does not follow SECURE ACT 2.0?

[MarilynG1]

Yes, Alaska does follow the Secure Act 2.0 and allow rollovers from 529 plans to a Roth IRA.  Make sure if the Roth IRA is for the beneficiary, that the contribution is not entered in the recipient's tax return as a rollover contribution. 

According to IRS Publication 970, qualified rollovers are not reported on your tax return. If you choose not to enter it in tax software, keep it in your records to show the IRS if needed. 

Here's more detailed info on the Alaska 529 and IRS Pub. 970.

@BogeyGolfer13 

[BogeyGolfer13]

Thanks MarilynG1.  Please note that the following paragraph on Form 1099-Q Copy B for Recipient is a bit intimidating:  "This is important tax information and is being furnished to the IRS.  If you are required to file a return a negligence penalty or other sanction may be imposed on you if the income tax and the IRS determines that it has not been reported."  I think TurboTax should allow for reporting of 1099-Q and when Box 4b is check as "QTP to Roth IRA", then the TurboTax software should remove the gross distribution from taxable income.  In my mind, if the IRS software tries to reconcile 1099-Q on its own with Box 4b status, then that is one thing.  However, the "intimidation" part is not reporting 1099-Q seems to be negligence.   So, I feel we are dancing a tightrope on negligence. 

[AmyC]

The wording on the Q is to convince the taxpayer to report the form. The IRS does not want extra forms to process. Therefore,  IRS Publication 970, Tax Benefits for Education states that nontaxable distributions should not be entered.

You are supposed to add the form to your tax files along with proof of the rollover, in case the IRS does ask. The IRS knows all the account balances in investments so they can see the movement from the 529 moved to the ROTH when the same social security number is attached to both accounts.

A note of caution: there is a $35,000 lifetime maximum, the beneficiary must have earned income equal to or greater than the amount rolled over, the 529 had to be open at least 15 years and you cannot rollover any contributions made in the last 5 years.

@BogeyGolfer13 

[Taxi_Nerd]

There is another unintended consequence of Turbo Tax incompetent processing of the 1099-Q code "QTP to Roth": the Roth Basis is not updated on the 2025 TT IRA Worksheet. I believe that a QTP to Roth roll-over should increase the Roth Basis as it is treated as a Roth Contribution/Rollover equivalent. 

[CatinaT1]

If your rollover met all SECURE 2.0 Act requirements, it should not be taxed. If TurboTax is calculating a tax on your 529 converted to a Roth IRA, it is likely because you manually entered Form 1099-Q into the software, or because the transfer did not meet the strict IRS criteria for a qualified rollover.

Here are the 2025 tax regulations that must be met for this rollover to be tax-free:

• The 529 account must have been open for at least 15 years.
• The beneficiary of the 529 account and the owner of the Roth IRA must be the exact same person.
• The rolled-over funds (and any associated earnings) must have been in the 529 account for at least 5 years.
• The beneficiary must have earned income in 2025 that is equal to or greater than the $7,000 converted.
• The conversion must have been a direct trustee-to-trustee transfer.
• The rollover cannot exceed the 2025 annual Roth IRA contribution limit ($7,000 if under age 50; $8,000 if 50 or older) and counts toward the $35,000 lifetime rollover limit per beneficiary.

If your conversion meets all of the requirement above, IRS Publication 970 says that this is a non-taxable event and should not be reported on your tax return. Entering the Form 1099-Q into TurboTax triggers the software to treat the earnings as a non-qualified, taxable distribution.

To stop the rollover from being taxed, you must delete the form in TurboTax:

1. Select Tax Tools from the left-hand menu.
2. Select Tools.
3. Select Delete a form in the pop-up window.
4. Locate Form 1099-Q on the list and select Delete next to it.
5. Confirm the deletion and select Continue with my return.
6. You must retain your Form 1099-Q and the Form 5498 you will receive from your Roth IRA custodian in your personal records in the event of an IRS inquiry.