I'm considering rolling a traditional IRA to a Roth, and I want to do an ESTIMATE of the tax impact. How do I fill out a fake 1099-R?

[paulzimmer]

I'm considering rolling a traditional IRA to a Roth.  This is a complicated decision.  I ran TT 2017 and entered my best guess at what the number will look like.  Now I want to enter various rollover amounts and see what the tax impact will be.  But all I'm offered is a complicated "1099-R"!  What does that look like for an IRA to Roth rollover?

[macuser_22 · Accepted solution]

Enter a 1099-R here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR  Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.

Be sure to pick the correct 1099-R type: Standard 1099-R.

For test purposes (and you should delete the test 1099-R before doing a real return)  Enter the amount of the distribution into boxes 1 and 2,  Enter code 1 into box 7 and check the IRA/SEP/SIMPLE box next to box 7.

If this is a conversion to a Roth, answer the question that you moved the money to another retirement account (can be the same account). The screen will open up with choices of where it was moved.   Say that you converted it to a Roth.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases, such as if you have any non-deductible basis in the IRA.]

You can always return as shown above.

[macuser_22]

I will add a note that if you want to pay the tax from the IRA (usually better to pay the tax from separate funds) you would enter the Federal tax you want withheld into box 4 and state tax withheld in box 15 and the state in box 12.
  
The withholding will be part of the taxable distribution but not the conversion so there will be less to convert, but you pay tax on the total distribution including anything withheld for tax.

[paulzimmer]

Yes, thanks, that worked!  BTW, why are there 2 identical "box 7"s (selecting the code)?  Any idea?

[VolvoGirl]

There can be  2 codes for box 7.  You probably don't need 2.

[VolvoGirl]

Here is the 1099R form from the IRS.  It is several pages and copies.  It lists all the codes possible.

[VolvoGirl]

Sorry forgot the link
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/f1099r.pdf">https://www.irs.gov/pub/irs-pdf/f1099r.pdf</a>

[macuser_22]

In your case there will only be one code in box 7 - a "1" if you are under age 59 1/2 or a "7" if older.  For your purpose, if the distribution is to be converted to a Roth, the difference between 1 & 7 is immaterial since there is no early distribution penalty applied for a conversion.  (There could be an early distribution penalty if under age 59 1/2 and not all of the distribution was converted to a Roth and there is a code 1).

If you want to see all of the possible codes for both boxes see the 1099-R instructions:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/instructions/i1099r#idm139679928890256">https://www.irs.gov/instructions/i1099r#...>
"Guide to Distribution Codes".   The code in the left column would go in the top box 7 and if another code that is listed in the right most column applies the it would go in the bottom box 7.  There can be a maximum of 2 codes.

For example a code 1 and a code 8 would indicate an early distribution (code 1) of an excess contribution to a retirement plan (code 😎 such as a 401(k).  

 None of the 2 code 7's apply to a Traditional IRA distribution.