IRA conversion to Roth IRA

Forum|Forum|5 years ago
March 19, 2021
4 replies
32 views

Financial Advisor recommended I move some money from my traditional IRA into a Roth IRA, as much as I could move without pushing myself into a higher tax bracket. Now, turbo tax is telling me I am under penalty because I contributed over the allowable $7,000 for my age. TT is telling me I will incur a 6% penalty until I correct this issue. Am I missing something here? Am I giving TT wrong info or was it my Financial Advisor that put me in this mess? Need some guidance

TurboTax Self Employed Online

Best answer by macuser_22

A conversion is NOT a new contribution and does not get entered in the IRA contribution section at all.

macuser_22

Alumni - Champ

How did you move it? Do you have a 1099-R?

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

skiingthebumpsAuthor

Level 2

Yes I have a 1099-R and the conversion from traditional IRA to Roth IRA took place in like, one day using the same financial institution

macuser_22

Alumni - Champ

Just enter the 1099-R and say you "moved the money" and did a "combination of things" and enter the conversion amount in the lower box. That will be a taxable distribution or partly taxable if you have a after-tax basis in the IRA.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

macuser_22

Answer

Alumni - Champ

A conversion is NOT a new contribution and does not get entered in the IRA contribution section at all.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

pathfinder1298

Level 2

It is my understanding the CARES Act not only suspended the Required Minimum Distribution From IRAs but also allowed tax payers over the age of 70 1/2 to use funds from a Traditional IRA to convert to a Roth IRA.

I understand that I will have to pay taxes on said Traditional IRA but TT is indicating that I can't convert the funds because I did not receive wages equal to the transfer and the I would be penalized until I correct this issue.

Please advise!

macuser_22

Alumni - Champ

@pathfinder1298 wrote:

It is my understanding the CARES Act not only suspended the Required Minimum Distribution From IRAs but also allowed tax payers over the age of 70 1/2 to use funds from a Traditional IRA to convert to a Roth IRA.

I understand that I will have to pay taxes on said Traditional IRA but TT is indicating that I can't convert the funds because I did not receive wages equal to the transfer and the I would be penalized until I correct this issue.

Please advise!

The CARES Act is immaterial. There has never been a age restriction for a *conversion*. That has nothing to do with a *contribution* - totally different things.

A conversion is simply taking a taxable Traditional distribution and having the trustee of the account move to to a Roth IRA. That is subject to the normal Traditional IRA distribution tax.

The SRCURE Act (not CARES Act) removed the age restriction for new Traditional IRA *contributions* that still must come from taxable compensation as defined by the IRS.

(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deductible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).

See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2020_publink1000230355

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

rkdiaz1

Level 2

I did a conversion from a tradition IRA to a Roth IRS but did not receive a 1099 only a 5498 form. I called the company to see if they are sending out a 1099 and they said no. How do I enter the conversion into turbo tax without the 1099. It will only let me enter a contribution which then says I have an excess and have to pay a penalty.

VolvoGirl

Level 15

You need to get the 1099R from the Traditional IRA. You have to get it. And you do not enter the conversion as a contribution to the ROTH. Only enter it from the 1099R. The 5498 is only for your records.