Inherited IRA converted to Roth IRA not showing on form 8606

[mileage65]

Converted part of the inherited IRA  from my late spouse (died 2018) to Inherited Roth IRA for 2022 but this was not showing on Form 8606 on Turbo Tax.  May I know if this should be showing in this form?  The distribution on the 1099 R shows on box 7 as 4.  Is this the reason why this is not showing on Form 8606 even this was converted to Inherited Roth IRA?

The only one that was included on Form 8606 was the distribution that I have converted to Roth IRA  from my own traditional roll over IRA which the 1099 R written on Box 7 as 2 which is correct as converted to Roth IRA.

The 1099 R with No. 2 on Box 7 was included on Form 8606 while the other coming from inherited IRA with No. 4 on Box 7 was not included.  Is this correct?

I really need help!

[DavidD66]

Can you clarify something?  Is the Inherited IRA distribution showing as a taxable distribution on line 4a. and/or line 4b. of your Form 1040?

[mileage65]

Thank you for your reply.  

Yes, these are both showing taxable on 1040, the inherited IRA converted to Roth and my own roll over IRA converted to Roth IRA.  And it was also automatically entered on Form 8606. 

[mileage65]

I just wanted to clarify that the only included on 8606 was the roll over IRA not the inherited IRA 

[dmertz · Accepted solution]

TurboTax does not permit reporting any Roth conversion from an inherited traditional IRA (code 4 in box 7 with the IRA/SEP/SIMPLE box marked).

While in the tax code it appears pretty clear that a spouse beneficiary is permitted to convert an inherited traditional IRA to their own Roth IRA, it's not so clear that the spouse beneficiary is permitted to convert an inherited IRA to an inherited Roth IRA.  The only reason to convert to an inherited IRA instead of to their own IRA would be for a spouse beneficiary who is under age 59½ to be able to take a distribution of converted funds from the inherited Roth IRA before the 5-year conversion holding period has been completed.  However, RMDs will be required to be taken from the inherited Roth IRA.  The year in which RMDs must begin will depend on the age of the deceased spouse.

Assuming that a conversion to an inherited Roth IRA is permitted, to be reported on a Form 8606 the conversion would have to be reported on a Form 8606 of the inherited account separate from your own Form 8606.  Nothing about the inherited Roth IRA combines with your own Roth IRAs unless you assume ownership of the inherited IRA, making it your own.  This Form 1099-R would have to be prepared outside of TurboTax and mailed with your tax return.  As long as you not indicate to TurboTax that you did not put the money into your own IRA (meaning a traditional IRA), TurboTax treats a code-4 distribution as taxable, so at least the amount on Form 1040 line 4b will be correct.

Finally, you'll want to be sure that the inherited Roth IRA really is an inherited Roth IRA, titled in the name of your deceased spouse as decedent for your benefit as beneficiary.  If it's titled in just your name, it's not an inherited Roth IRA but is instead your own Roth IRA.  Even if the conversion was to your own Roth IRA, the conversion would still be reportable on a Form 8606 separate from your own which must be prepared outside of TurboTax and mailed, the same as if the conversion was to an inherited Roth IRA.

[fanfare · Accepted solution]

The proper way to file Form 8606 is attached to Form 1040-X.
Form 8606 can be mailed by itself only when you are otherwise not required to file a tax return.

Do you have the correct taxable amount on Line 4b?

Get Form 1040-X from IRS website and mail it in with your 8606, which you can also get in fillable PDF.
Note: since you are not changing any dollar amounts on your amended tax return, you can leave all the lines 1-23 EMPTY.
For an inherited IRA, the names on 8606 should be "<owner> and <your name> BENE" or Beneficiary if it fits, and your SSN.

Part III explanation: "didn't include Form 8606 with e-File".
You will have to mail it so this does not use up your one 1040-X e-File.

[mileage65]

I appreciate all your help!  This is very helpful.  All your answers made me understand that my own conversion and the conversion for my late husband should use a separate 8606.

Yes, It is really inherited IRA and rolled to Inherited Roth IRA.  I have reconfirmed with the financial institution and I am receiving notice via portal that I need to distribute RMD for the year. 

I will mail these 2 Form 8606 after e-filing the tax return this year.

You are all very helpful!  Thank you very much!