IRA rollovers

[mikekathy]

In 2020 we rolled over a sum from a traditional IRA to a Roth IRA.  TurboTax insists that we do not pay tax on the rollover.  This does not make sense to me.  I do not understand how to re-enter the 1099-R so that tax is paid.

[dmertz]

Code 2 means that you are not subject to an "additional" tax, a 10% early-distribution excise tax (penalty).  This is what TurboTax is telling you.  TurboTax is not telling you that the distribution is not subject to income tax.

Check Form 1040 line 4b to see that the Roth conversion is being included in taxable income.

[mikekathy]

Above is the TurboTax message.  The rollover is definitely not included in the tax calculation.

[dmertz · Accepted solution]

I think I see the issue.  Even though a Roth conversion is treated in the tax code as a taxable rollover, in TurboTax you must explicitly report it as a Roth conversion and not as a rollover.  If TurboTax does not provide the selection to indicate that you converted the entire amount to Roth (some versions do not), indicate that you did a combination of rolling over, converting and cashing out, then indicate the amount that was converted to Roth.  This distinction is necessary because nothing on a Form 1099-R for a distribution from a traditional IRA indicates what you did with the money.

[mikekathy]

Thanks.  That is the solution!

[h-poch1]

Where did I enter a rollover of the 1099

[JotikaT2]

Box 7 of your 1099-R form would be marked as a rollover. (Code G or H). 

You can go back to review your input in the Federal interview section as follows: 

1. Select Income & Expenses 
2. Scroll down to All Income 
3. Select show more to the right of Retirement Plans & Social Security 
4. Select start/revisit to the right of IRA, 401(k), Pension Plan Withdrawals (1099-R) 

[fred70]

I receive the form 1099 r showing  my withdraw OF money from my IRA account and then I received form 5498 for rollover contributions . I understand this should not be considered income and therefore is not taxable. How do I put this on my TurboTax form

[JotikaT2]

It sounds like this was an indirect rollover.  If so, the 1099-R form you were issued should reflect this.

You will enter the information in the Federal interview section of the program.

1. Select Income & Expenses 
2. Scroll down to All Income 
3. Select show more to the right of Retirement Plans & Social Security 
4. Select start/revisit to the right of IRA, 401(k), Pension Plan Withdrawals (1099-R) 
5. To enter additional 1099-R forms, simply select +Add Another 1099-R
6. Enter your information as prompted within the program.  You will indicate that you rolled over the money into another IRA when asked What did you do with the money from the institution.

Please see the links below for additional information.

Indirect vs direct rollover

IRA Contribution Form - 5498

@fred70