Traditional to Roth Conversion

[JJW16]

I converted $100k from my traditional IRA to my Roth IRA in 2023.  I know I owe taxes on this money as most is non-deductible, but when I go through the Turbo Tax Easy Step (1099-R), it appears that is adds the $100k I've converted as income (which I expected), but then when I select this money as converting to a Roth, it adds it again to my state income, increasing my state (Alabama) income by $200k.  With Alabama State Tax at 5%, I'm now paying 10% on this conversion.  Isn't this double taxing me on the same money?    

[SteamTrain]

OK...here's one thing that might be affecting it.

The majority of Alabama forms are not scheduled to be ready until after the 18th of January.

After you update your software on the 19th...if it still is an issue, then contact TTX Customer Support (CS) to report the error....and let CS work thru it with you to see if ther is some user entry error, or a real software issue....

IF you attempt to report it before then, they likely can't do anything since the final AL forms haven't been installed.

Here's the link to get a phone number for Customer Support when you do call:

What is the TurboTax phone number? (intuit.com)

[ALRoth]

Did you get a resolution?  As of February 18th, it has not been corrected. 

[JJW16]

Yes, when you enter the data on the federal form (1099-R) for a traditional to Roth conversion, it will compute the federal taxes correctly, however, the taxable amount you convert AND the amount you roll-over to a Roth are both imported into the State (Alabama) tax form as reported income, thereby doubling the amount.  You need to go to your State Tax section and under menu selection of Income, then Retirement Distributions, it will take you to a screen that says that “Some or All of Your Distribution is Taxable”.  Both blocks may be filled in due to you answering the 1099-R questions on your federal return.  However, it is a one “OR" the other option, and you need to manually decide which one is more appropriate for your situation.  By deleting the value in one of these blocks, your State Income should now be correct. 

[ALRoth]

Thanks!  That is probably the best path for now  

[dspb]

I'm having the same question as above.

Turbotax automatically is counting my Conversion twice - once as a distribution and again as a conversion.  

My version of TurboTax Home & Business doesn't allow me to access income in the step-by-step instructions.  When I go to the "Forms" view, I still can't make any changes on my State forms to correct this.

According to TT, I have the latest software update.

Now what?

[JJW16]

Not sure you saw this, but here is what I found out with TT Customer Service.

Yes, when you enter the data on the federal form (1099-R) for a traditional to Roth conversion, it will compute the federal taxes correctly, however, the taxable amount you convert AND the amount you roll-over to a Roth are both imported into the State (Alabama) tax form as reported income, thereby doubling the amount.  You need to go to your State Tax section and under menu selection of Income, then Retirement Distributions, it will take you to a screen that says that “Some or All of Your Distribution is Taxable”.  Both blocks may be filled in due to you answering the 1099-R questions on your federal return.  However, it is a one “OR" the other option, and you need to manually decide which one is more appropriate for your situation.  By deleting the value in one of these blocks, your State Income should now be correct. 

You should be able to modify your State return this way.  Not perfect, but the only work-around I know of.

[dspb]

Thanks for the quick response. 

For some reason, I can't get to the screen you are talking about.  This MIGHT be due to Alabama being the SECOND state that I loaded.  I have a small amount of income in another state, so have to complete that return first.  My IRAs aren't taxed in that state.  So, I have to complete the non-residency state first.  That state lets me go through the step-by-step.  The Alabama section won't.

When I go to Alabama in my return, it wants to take me to the screen about paying a penalty.  I can't choose anything in the menu for Alabama.  When I try to go "back," it gets me back to the beginning of states.  When I go forward, it wants to discuss the penalty.

When I go to the forms, it won't let me make changes on the IRA line.

Any other suggestions?  

I DO appreciate your help so far.

Thanks.

[JJW16]

If you can access your AL forms, then you can try to manually change the number by going to Alabama Forms, then selecting "Pen Excl Wks" and manually change the number.  Hope this works for you.

[dspb]

All,

I called the TurboTax helpline and a patient employee helped me through the maze.  We had to do some work-arounds, but it worked out fine.

One thing I discovered is that I needed to click on the Alabama menu item, rather than continue with Alabama tax return.  I didn't realize there was a difference in how you got to the state return.  So, the suggestion above is good.

And, if you can't figure something out in how the program works after reading all the suggestions, reach out to TT Support.  I was surprised by how quickly my call was answered!

Thanks so much for the help.