Reporting Roth Conversion in Retirement

[mdktech24]

I have a rollover IRA account and made a Roth conversion in December 2024. I had received a 1099-R that showed the distribution and taxable amount. Because I’m over 59.5, there is a code 7 in box 7. Is this considered a backdoor Roth IRA conversion?

I found some notes in the TurboTax community and it indicates to perform 2 steps to enter a backdoor Roth IRA conversion. The first step is to enter the Non-Deductible Contribution to a Tradition IRA. Do I still need to perform this step even though I didn’t make any contributions to my rollover IRA account? However, because I had retired in April 2024 and made contributions to my TSP account (Government’s 401K) from January through March of 2024, does my contribution to TSP counts as a contribution to a traditional IRA? In one of the steps, I need to answer “Did you contributed to a traditional IRA?”

I’m trying to figure how to enter the amount of the Roth conversion so that TurboTax can keep track of my Roth IRA basis. Or is my Roth basis no longer relevant since I am over 59.5 and had held my Roth IRA more than 5 year? If so, then does this mean I don’t really to report Roth conversions from now on?

[ThomasM125]

What you describe is not a backdoor Roth IRA conversion. It is just a normal Roth IRA conversion. For a backdoor conversion, you would make non-deducible contributions to a traditional IRA, then roll that over into a Roth IRA. Consequently, there would be no tax on the funds rolled over.

In your case, to roll a traditional IRA balance over to a Roth IRA, the amount rolled over will be taxable. You just need to report the Form 1099-R in TurboTax and answer the questions in the program.

The contributions to your employer pension plan would not be considered a contribution to an IRA. It is true that you likely will not need your Roth IRA basis going forward, since all of your distributions going forward will be tax-free, but you do need to report your contributions in TurboTax to make sure they are allowable each year, as there are limitation on that based on your total and earned income.

[mdktech24]

Thank you for your answer. I understand that contributions to a Roth IRA needs to be reported in TurboTax to make sure they are allowable each year based on my income. Is there a limitation on the amount that is allowable in a normal Roth IRA conversion? 

In 2024, I didn't make any contributions to a Roth IRA. I only converted $70K from my rollover IRA to my Roth IRA and had withheld the appropriate tax. Did I exceeded the limitation (if such limitation exists)?

Would TurboTax generate a Form 8606 with the taxable portion of the conversion reported of my Roth on my Form 1040?

Lastly, would I still need to keep track of Form 5498 (which I have not received yet) from my brokerage firm that reports the funds received and the value of my Roth IRA at the end of 2024?

[ThomasM125 · Accepted solution]

No, there is not a yearly or other limit on the amount of traditional IRA contributions you can convert to a Roth IRA, so you did not exceed any limits. TurboTax will generate a Form 8606 reporting the taxable amount of the contribution in 2024. You should keep the Form 5498 in your tax records as support for the entries on your tax return, you may need it in the case of an audit.

[mdktech24]

As a follow up question, because last year I had made several withdrawals from my rollover IRA throughout the year and the last withdrawal that I made was for the Roth IRA conversion. How do I let TurboTax know the amount that I had converted to my Roth IRA? 

In my 1099-R form, it showed the total amount of my distribution and the total taxable amount. In addition, it showed the Federal Tax and State Tax withhold amounts. Hence, I don't see how TurboTax can figure out the amount of my Roth conversion.

[DanaB27]

You can let TurboTax know in the follow-up questions know how much you converted.

To enter the Form 1099-R for the conversion in TurboTax Online: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Did you convert the gross amount of $XXX (Box 1) to a Roth IRA?" screen select "No, I converted less than $XXXX" and enter the amount converted.
6. On the "Review your 1099-R info" screen click "Continue" after you entered all Form 1099-R
7. Answer the follow-up questions

In TurboTax Desktop:

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
5. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
6. On the "Your 1099-R Entries" screen click "continue" after you entered all Form 1099-R
7. Answer the follow-up questions

@mdktech24