1099R from SEP to Roth Conversion

[GangofThrone]

I received 1099R from Fidelity for the above distribution. Box 7 has code 2, with IRA/SEP/SIMPLE box checked. This is identical to my other 1099R from another traditional IRA which I used for Backdoor Roth conversion. After both were imported into TurboTax Home&business, they were treated the same, i.e., both were declared non-taxable. I knew better, as SEP contribution is clearly pretax and needs to be taxed on distribution, but I cannot convince TurboTax. I found by changing the box 7 code to G, and uncheck the box for IRA, TurboTax will now tax this, but when I call Fidelity, they refuse to make a corrected 1099R for me, and insist that they made the right version and it was TurboTax that needs to be fixed. Then I stayed on the phone for a TurboTax representative for 1 hour and still could not figure out how to do this, short of changing the code. Would appreciate your professional suggestions!

[dmertz]

The codes on the Forms 1099-R are correct, you must not change them.

What TurboTax told you is that the distributions are not subject to "additional taxes," i.e., the 10% excise tax (penalty) on early distributions; code 2 means no penalty.  Check your Form 8606 Part II to see how much of your Roth conversions are being treated as taxable.  Also check Form 1040 line 4b.

[GangofThrone]

Thanks, but TT did say literally "you do not have to pay taxes on your $$$$ rollover to...". The 8606s only reflect my non-deductible IRA distribution but not SEP IRA. For the SEP IRA 1099R entry, TT did not ask if the rollover is for a Roth. I seriously think this is a TT glitch, but if it was, how come no one has recognized before. 

[dmertz]

If TurboTax literally said that you do not owe tax on this distribution, it suggests that you somehow told TurboTax it was an ordinary rollover instead of a Roth conversion.  I suggest deleting the Form 1099-R that reports the distribution from the SEP-IRA, then reentering it as shown on  the Form 1099-R provided by Fidelity.  In the questions that follow, indicate that you moved the money to another retirement account, that you did a combination of rolling over, converting and cashing out, then indicate that amount that was converted to Roth (perhaps the entire amount.

[curiousgeorge06]

I'm encountering the same issue. SEP to Roth conversion should be taxable, but is treated as not taxable. Did you ever find a solution?