I have an esop payout over 20k that was rolled into a Roth IRA. Following the directions turbotax is saying I put too much in and need to pay 6% penalty. Is this right?

Forum|Forum|7 years ago
June 5, 2019
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TurboTax Deluxe Online

Best answer by dmertz

Do not enter this anywhere under Deductions & Credits. Go back an remove any entry that you made for this as new Roth IRA contribution.

To report a rollover, enter the Form 1099-R that you received for the ESOP payout. If the Form 1099-R has code G in box 7, indicate that you moved the money to a Roth IRA account. If the Form 1099-R instead has code 1, 2 or 7 in box 7, simply indicate the follow-up simply indicate that you moved the money to another retirement account and that you converted all of it to a Roth IRA.

dmertzAnswer

Level 15

Do not enter this anywhere under Deductions & Credits. Go back an remove any entry that you made for this as new Roth IRA contribution.

KarenJ2

Level 13

I am not sure how you structured your rollover. The information I found stated that an esop payout to a Roth IRA is taxable, but will be tax-free when withdrawn (if withdrawal is according to Roth IRA rules.)

There are income limits for contributing to Roth. If TurboTax is indicating a 6% penalty, that indicates that you contributed directly to a Roth and must pay a penalty. You are allowed if your income allows to contribute $6,000 or $7,000 depending on your age.

If you are single, you must have a modified adjusted gross income under $122,000 to contribute to a Roth IRA for the 2019 tax year, but partial contributions to a Roth IRA if your income is between $122,000 and $137,000. If you are married filing jointly, your MAGI must be less than $203,000, with reductions beginning at $193,000.

[Edited 03.25.20 | 8:14 am]

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