IRA to Roth IRA conversion

[YP55]

Hello all.

I am using TT2023 Premier desktop version.

I converted my regular IRA to Roth IRA. I got form 1099R. State and federal taxes was paid during the conversion. The entire amount was converted.

I expected to see the option in Turbo Tax to say that all IRA was converted to Roth IRA.

But this option does not exist.

The only option about conversion exists in saying that I did a combination of conversion, rollover and cashing out. And then I can enter the entire amount in a box designated for conversion to Roth IRA and put ZERO into rolled over box. Is it the right way to enter it in TT?   Please let me know if it is OK or I need to do it differently.

Thanks.

[dmertz]

"State and federal taxes was paid during the conversion. The entire amount was converted."

That's contradictory unless you substituted other funds to indirectly complete the conversion of the portion withheld for taxes.  If you did not do so, the amount converted is the gross amount minus the amount withheld for taxes.

When entering the Form 1099-R into the CD/download version of TurboTax, indicate that you moved the funds to another retirement account, that you did a combination of rolling over, converting and cashing out, then indicate the amount converted.  TurboTax will treat the portion not converted as the amount cashed out.

[YP55]

Sorry, I mean all funds in my regular IRA got converted and nothing was left there. But you are correct and I see your point.

So, if I had for example about $60K in my regular IRA and during the conversion paid about $6K federal taxes and $2K state taxes I would end up with about $52K in my Roth IRA.

So, what numbers should I put in a box designated for conversion to Roth IRA and in rolled over box?

Thanks again.

[dmertz]

Whatever amount ended up in the Roth IRA is the amount converted.  In your example, that's $52k converted, nothing rolled over and $8k cashed out.

[YP55]

Thanks. Interesting that if I enter $60K or $52K in amount converted to Roth IRA box, the Federal Tax does not change. Does it make sense? Maybe it’s better to enter $60K in this case. The only reason is that $60K number is present in boxes 1 and 2a on my 1099R, But $52K does not exist on a form at all– it’s just a result of subtraction from $60K federal and state taxes paid during the conversion.

Thanks again for your help.

[dmertz]

If the only amount that made it to the Roth IRA was $52,000, that's the amount that was converted.  If your tax return is showing an incorrect taxable amount, that's a different issue, possibly related to missing or incorrect information on Form 8606.

[fanfare]

your taxable amount depends on your prior years basis plus any amount established as basis for 2023.

you will also pay an early withdrawal penalty on withholding if you were under age 59 1/2.

[YP55]

Hmmm… On 8606 Form I have $52,000 in lines 16 and 18 as a taxable amount. Which is probably not correct as my 1099 R is showing it as $60,000.

I guess my stupid question of the day is: What should be taxable amount? Is it $60,000 – the regular IRA amount before conversion? Or is it $52,000 – that ended up in my Roth IRA after conversion and taxes?

[dmertz]

"On 8606 Form I have $52,000 in lines 16 and 18 as a taxable amount. Which is probably not correct as my 1099 R is showing it as $60,000."

Both are correct.  $52,000 was converted.  The $8,000 that went to tax withholding was not converted, assuming that you did not substitute other funds to complete an indirect conversion of the $8,000 within 60 days of the distribution.

The taxable amount is $60,000, $8,000 on form 8606 line 15c and $52,000 on line 18.  If you were under age 59½ at the time of the distribution from the traditional IRA, the $8,000 is also subject to a 10%, $800 penalty on Part I of Form 5329.