Question about the Retirement Saver’s Credit

[psychopengy]

This is complicated, so many thanks for reading. To summarize: I’ll make a $6,600 Roth IRA contribution before the tax deadline. In December 2024, I made an $18,500 Roth conversion. The funds were immediately converted from the Traditional IRA to the Roth. I received a 1099-R showing a distribution. Turbo Tax says that I’m not eligible for the Retirement Saver’s Credit. In the instructions for IRS form 8880 (Credit for Qualified Retirement Savings Contributions), for the entry for line 4 it states: “Enter the total amount of distributions you, and your spouse if filing jointly, received after 2021 and before the due date of your 2024 return (including extensions) from any of the following types of plans.”

• Traditional or Roth IRAs, or ABLE accounts. 

A little further down it says:  

Don’t include any of the following. 

• Distributions from your eligible retirement plan (other than a Roth IRA) rolled over or converted to your Roth IRA. 

I actually called the IRS help line about this and they said that my Traditional IRA, from which I made the Roth conversion, is considered an eligible retirement plan, and that I shouldn’t enter the $18,500 conversion on line 4. In that case, line 4 of form 8880 would be 0, and, given my AGI of $27,064, I should be eligible for a $200 Retirement Saver’s Credit. 

If I’m really not eligible for this credit, please explain why, or if you think I am, is there any way to claim it in TT? That’s real money to me. Many thanks. 

[dmertz]

Did you mistakenly fail to indicate to TurboTax that the $18,500 distribution was converted to Roth?  Failing to indicate to TurboTax that the distribution was converted to Roth would produce the same increase in AGI as would correctly reporting that it had been converted, but it would be seen as a distribution that is to be included on Form 8880 line 4.

You can either edit the 1099-R in TurboTax and make sure that you've explicitly indicated that this amount was converted to Roth, or you might consider deleting this Form 1099-R and reentering it, similarly making sure in the follow-up questions to indicate the amount converted to Roth.