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Level 1
posted May 17, 2021 2:53:07 PM

Adding a Roth IRA contribution in Turbo Tax and FED taxes due increase significantly

We took part of a traditional IRA, cashed out a fairly large amount, received a 1099-R for the normal distribution (age 64) then opened a new Roth IRA and deposited the money from the distribution into the Roth IRA. In Turbo Tax, it asks if I made a contribution to a Roth IRA in 2020. When I check yes and enter the amount, my FED taxes go up in the thousands. Do I need to report the contribution in the ROTH IRA? It's my wife's account and she is retired.

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1 Best answer
Expert Alumni
May 17, 2021 3:10:10 PM

No, you do not enter the amount under contribution if you converted the money to a Roth IRA within 60 days after withdrawing it.

 

Please follow these steps to report it:

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top right and type “1099-R”
  3. Click on “Jump to 1099-R”
  4. Click "Continue" and enter the information from your 1099-R
  5. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
  6. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"

2 Replies
New Member
May 17, 2021 3:09:57 PM

The difference between a Roth IRA and a normal IRA is when you pay the taxes on the money. With a traditional IRA the taxes are deferred until you are retired and presumably have a lower income and tax rate.  With a Roth, you pay the taxes up front.  So that explains the high increase in your tax liability.  There are many other convoluted rules for all of these accounts and when they are taxed or not.

Expert Alumni
May 17, 2021 3:10:10 PM

No, you do not enter the amount under contribution if you converted the money to a Roth IRA within 60 days after withdrawing it.

 

Please follow these steps to report it:

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top right and type “1099-R”
  3. Click on “Jump to 1099-R”
  4. Click "Continue" and enter the information from your 1099-R
  5. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
  6. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"