Roth Conversion with Tax Withheld

Forum|Forum|7 years ago
June 4, 2019
1 reply
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Did a Roth Conversion from Traditional IRA with 10% tax withheld, received 1099R the gross distribution and taxable amount shows the conversion amount of $2000, tax withheld of $200. The actual deposit to Roth account was $1800. When enter this information in TT. Need some clarification on the TT interview questions. Which answer would apply:

Yes, added $200 to the $1800 got (total of $2000)
No, didn't add $200 to the $1800 got

TurboTax Premier Windows

Best answer by TomD8

If you used the funds from the conversion to pay the taxes, then you didn't "add the $200." In effect, you converted $1800 and took out $200 to pay the tax. That's why the actual deposit to your Roth was only $1800.

If you had converted the entire $2,000 and paid the $200 tax bill with outside funds, that would be "adding" the $200.

If you're under 59 1/2, you'll incur the 10% withdrawal penalty on the $200 you didn't convert.

This is a good example of why it's better to avoid using the funds from a Roth conversion to pay the tax on the conversion.

TomD8

Answer

Alumni - Champ

If you had converted the entire $2,000 and paid the $200 tax bill with outside funds, that would be "adding" the $200.

If you're under 59 1/2, you'll incur the 10% withdrawal penalty on the $200 you didn't convert.

This is a good example of why it's better to avoid using the funds from a Roth conversion to pay the tax on the conversion.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

Roth Conversion with Tax Withheld

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