Roth Conversion 1099-R

[dude1234]

Hi, I have a 1099-R that has $20,000 from a conversion I did from a traditional IRA to a Roth IRA and the codes shown are 2K. I thought this would be taxable, but when entering the information from all boxes into TurboTax it says that I don't owe any taxes on that amount that was converted. On my 1040 it shows $20,000 in box 4a, but then $0 in 4b and notes "ROLLOVER". Is this correct?

[fanfare]

after entering 1099-R, did you press CONTINUE  ?

That's important.

@dude1234 

[dude1234]

Yes of course. The $20,000 shows on my final 1040 in box 4a like I said. The 1099-R was entered correctly based on the box entries. I've re-entered it several times to make sure b/c I keep wondering why its showing $0 in box 4b of the 1040.

[NCperson]

@dude1234 on the 1099-R form  itself, what is in Box 1 and what is in Box 2? 

what you enter from Box 2 of Form 1099-R should end up in Box 4b on Form 1040. 

[dmertz]

The payer might have prepared the Form 1099-R incorrectly.  They were required to put the same amount in box 2a as is in box 1 because the taxable amount of a distribution from an IRA must be assumed by the payer to be the same as the gross amount.  Any difference in the taxable amount would have to be determined on Form 8606 in your tax return where any basis in nondeductible traditional IRA contributions would be applied.  (Since you say that this was a conversion from your traditional IRA, I assume that the IRA/SEP/SIMPLE box is marked on this form.)

Also, make sure that, when asked, you indicate that you did a combination of converting, rolling over and cashing out, then indicate the entire gross amount as the amount converted.  Do not simply indicate that you rolled the distribution over since a rollover makes that portion of the distribution nontaxable.

Code K indicates that the conversion involved an asset that does not have a readily available Fair Market Value.  If that's the case, the amount in box 1 would have to have been determined by obtaining an appraisal, otherwise the amount in box 1 is going to be incorrect.

[dude1234]

Both box 1 and box 2a from the 1099-R have $20,000 in it which is part of the reason I’m also confused.

[dude1234]

Box 1 and box 2a have the same amount and the IRA/SEP/SIMPLE box is marked.

There was nowhere to indicate a “rollover” so that’s also where I was confused.

[NCperson]

@dude1234 if you remove the code K what happens? I tested this in the Desktop software and with or without the "k" doesn't make a difference - the $20,000 displays as taxable on the tax return......

[dmertz]

When you enter this Form 1099-R, TurboTax will ask what you did with the money.  You must answer:  You moved the money to another retirement account, you did a combination of rolling over converting and cashing out, then you must enter $20,000 in the box for conversion to Roth.

[dude1234]

The only question is asks before the box entry for the 1099-R is "Tell us which 1099-R you have" and I selected the first option "Form 1099-R, withdrawl of money from 401(k) retirement plans, pensions, IRAs, etc." After selecting that it goes straight to the box entry.

[dude1234]

If I remove K it still gives me a message "Good News: You don't owe extra tax on this money. Based on your entry for box 7 on 1099-R, you don't need to pay any extra taxes on the money taken out of this account."

[dude1234]

After entering all the 1099-R box info in, I get prompted with "What did you do with the money from XXX" and I answered "Moved the money to another retirement account" and then chose "rolled over all of this money" and that's when I get another message stating "We want to let you know...you won't have to pay tax on your $20,000 rollover from XXX".

It gives me the same messages whether I include the code K or no K.

[NCperson]

you did NOT roll the money to another retirement account - answer NO to that question;  You did a 'coversion', which is different than 'rolling'

you want to click the button indicating you did a combination rolling, converting and cashing out.

then it is going to ask how much went into a Roth - put the $20,000 here. 

that should solve your problem 

[dude1234]

Thanks for the help. This fixes the error.