I took $25,000 from the traditional IRA and put $20,000 into the Roth. The $5,000 was withheld to offset the taxes. How do I answer the rollover question?

[kluca]

Do I check that I did a combination of rolling over or that I converted all of the money to the Roth?

[dmertz · Accepted solution]

Indicate that you converted the money to Roth (not that you did a combination).  TurboTax will ask you if you substituted other funds to complete the conversion of the amount withheld for taxes.  TurboTax will treat as converted to Roth the amount of the gross distribution that actually ended up in the Roth IRA and will treat the remainder as distributed from the traditional IRA and not rolled over or converted.  The amount not rolled over or converted will be subject to a 10% early-distribution penalty if you were under age 59½ and don't have some other penalty exception that applies.

[KarenJ]

A TurboTax FAQ detailed the Traditional IRA to Roth IRA conversions:

It’s the process of transferring money from a traditional IRA to a Roth IRA by one of the following methods:

• Same trustee transfer:  When your IRAs are held at the same financial institution, you can tell the trustee to transfer an amount from your traditional IRA to your Roth IRA.
• Trustee-to-trustee transfer:  When your IRAs are at different financial institutions, you can tell the trustee of your traditional IRA to transfer an amount directly to the trustee of your Roth IRA.
• Rollover:  You receive a distribution check from your traditional IRA, and within 60 days you contribute the money to a Roth IRA.

The amount withdrawn from your traditional IRA must equal the amount you deposit in your Roth IRA. If taxes were withheld, you must make up the difference or the missing amount will be treated as a taxable distribution and could also be subject to penalties if you are under age 59 1/2. Contact your plan trustee to review your tax withholding options.

A conversion to a Roth IRA results in taxation of any untaxed amounts from the traditional IRA. The conversion will be reported on Form 8606, Nondeductible IRAs.

Related Information:

• Where do I find Form 8606?