Skip to main content
Level 2
February 6, 2023
Question

Confusing Step-by-Step Instructions on Roth Conversion

  • February 6, 2023
  • 1 reply
  • 0 views

I did a back-door Roth conversion in 2022, and I also contributed the max to my Roth IRA in 2022. The conversion is reported as a regular distribution on 1099-R as expected. When I import the data from the 1099-R,  the step-by-step TT instructions are not clear with regard to how to report the amount (and which amount) as the conversion. I had taxes withheld when I did the conversion, so in my view, the amount of money I received and converted was the full distribution, less the taxes withheld (the amount that was deposited into my Roth account). So if I click the "Did a combination of rolling over, converting or cashing out" box in the instructions that pop up, and then enter the amount that was deposited in my Roth, there's a mis-match with the amount reported to the IRS, and elsewhere in my return.

 

Furthermore, if the amount I paid in taxes is not considered a conversion, TT adds that amount to my AGI. In my case, that pushed me over the income limit to be able to contribute to a Roth in addition to the conversion and calculates a $400 penalty from the IRS for contributing when I wasn't allowed to. The tax law allows for Roth contributions regardless of how much a Roth conversion is, as long as your AGI does not exceed the limits.

 

I think that the instructions should be changed to be more clear:

1. First ask if any of the distributed amount is a Roth conversion (not the generic "did you do a combination of these 3 things")

2. Include any taxes withheld and reported on the 1099-R in the total amount converted

 

1 reply

fanfare
Level 15
February 6, 2023

taxes withheld causes problems with a conversion as you have seen.

the tax withheld was not converted, it went to the IRS.

@jamesolson9618 

fanfare
Level 15
February 6, 2023

you can convert any amount you want at any time.

it is not a contribution, so the contribution and income limits do not apply.

 

you must have entered your conversion information incorrectly.

@jamesolson9618