IRA conversion to Roth

[Winchester1]

I am totally confused on how I enter this in Turbo Tax.  In 2019 I rolled my federal Thrift Savings balance into a traditional IRA.  At the end of the 2019 I converted $25,000 of that IRA into a Roth.  I have a 1099R showing that amount but can't figure out how to enter it so I don't have a penalty at the end for an over contribution to the Roth.  It shows up in the income column so I will be charged the taxes on it but how do I indicate it is a conversion and not a contribution.

[JosephF8]

Follow the link below to enter the Backdoor Roth

How do I enter a backdoor Roth IRA conversion? - Community

[dmertz]

For the Form 1099-R reporting the $25,000 converted to Roth, enter it only in the Form 1099-R entry section, indicate that it was moved to another retirement account and indicate the amount converted to Roth.  Do not enter it anywhere under Deductions & Credits; go back and remove it from there.

[dmertz]

The question has nothing to do with a backdoor Roth.

[BigMoney6969]

I converted $27000 from my traditional IRA to a Roth and did not deduct taxes at the time. I did not see a way to include that into my Turbo tax as such. It didn't want me to input more than the standard amount per year as income, ie $7000. How do I get around this?

[dmertz]

BigMoney6969, the Roth conversion is entered only by entering the Form 1099-R reporting the distribution from the traditional IRA and indicating in the follow-up that you moved the money to another retirement account and that you converted the entire amount to Roth.  Nothing about a Roth conversion is to be entered anywhere under Deductions & Credits.

[sml_19]

I AM CONFUSED ON HOW TO ENTER MY CONVERSION. I RECEIVED A 1099-R FOR A WITHDRAWAL OF $10K FROM MY IRA ACCOUNT WHICH I TRANSFERRED INTO MY ROTH ACCOUNT. I ALSO RECEIVED A FORM 5498 OF MY CONVERSION OF 10K.  I ENTERED MY 1099 R INTO TURBO TAX AS INCOME AND TRIED TO ENTER MY CONVERSION INTO DEDUCTIONS AND CREDITS.  IT IS SAYING I COULD NOT CONTRIBUTE ALL OF THE 10K TO MY ROTH AND MUST WITHDRAW A PORTION OTHERWISE I WILL BE PENALIZED.  I HAVE NOT CONTRIBUTED ANY ADDITIONAL MONEY INTO MY ROTH.  AM I NOT ALLOWED TO ROLL OVER THE FULL AMOUNT?  HOW DO I CORRECT THIS?

[dmertz]

sml_19, the answer to your question is in the reply immediately above your post.  Do not enter under Deductions & Credits anything regarding your Roth conversion.

[Siegy]

Don't understand, I am following the tax form 1099-R Distribution from Pension, Annuities, Retirement and IRA

and following the turbo tax instruction.

[DaveF1006]

What specific issues are you not able to understand and what are you trying to accomplish? Do you need to determine how to report or are there other things that aren't clearly defined in the instructions?

[bstman]

I don't understand the reason for going back several years to report Ira to  Roth ira conversions'. I convert about $20000 every year and pay 10% taxes on the amount from a 25 year 401k that was rolled over to an IRA. I have reported this on my 1099-R.

[ReneeM7122]

The reason for looking back several years to report the IRA to Roth conversion is because of the five-year rule.  

Roth IRA Conversions: The 5 year rule on conversions determines whether you’ll pay the 10 percent penalty when you withdrawal the amount you converted.

Roth IRA Contributions: While you can withdraw contributions tax and penalty free, the 5 year rule on contributions determines whether you’ll owe ordinary income tax on the earnings from the contributions. 

@bstman

[dmertz]

What ReneeM7122 mentions are two entirely different, separate 5-year rules, one for Roth conversions and one for Roth IRA distributions to be qualified distributions.

The 5-year rule for conversions must be completed before a converted amount that was taxable at conversion becomes equivalent to a regular contribution while someone is still under age 59½.  Until the the 5-year conversion holding period is met or you reach age 59½, a distribution of the converted amount that was taxable at conversion is subject to a 10% recapture penalty if distributed.  This is the 5-year rule that you are asking about.  Each year's conversions have a separate 5-year clock which TurboTax tracks.

The entirely different 5-year rule for determining qualified distribution where earnings are distributed tax free begins on January 1 of the year for which your first Roth IRA contribution is made.  Once this 5-year period has been satisfied and you have reached age 59½, earnings that are distributed are tax free.  TurboTax does not track this 5-year period.  TurboTax simply asks if you've had a Roth IRA before a certain year (before 2016 in 2020 TurboTax).  Although that's an inaccurate way to phrase the question, that bad phrasing doesn't present a problem for most people.

[jefran12]

I'm got a similar area of confusion.  This year I converted a $17,000 Rollover IRA to a Roth IRA.  I know that it was a taxable conversion.  However, when I entered the Form 1099-R, it said there was no tax due.  I wish that it was true, but I know that I owe taxes on this, but I can't figure out how or where to enter anything.

[dmertz]

What TurboTax said was that there was no "additional tax" due.  The "additional tax" is a 10% early-distribution penalty, and excise tax.  TurboTax displays this message simply because the From 1099-R has a code 2 in box 7.  This message confuses MANY users.

Entering the code 2 Form 1099-R should result in the entire $17,000 being included on Form 1040 line 4b unless you have basis in nondeductible traditional IRA contributions and you have a lower taxable amount calculated on Form 8606 as a result.  If you have basis in nondeductible traditional IRA contributions, be sure to click the Continue button on the "Your 1099-R Entries" page (CD/download version of TurboTax) or the "Review Your 1099-R Items" page (online version) and answer the questions regarding your basis and your year-end balance in traditional IRAs.