I converted $150k from a traditional IRA to an existing Roth (opened over 5 years ago) in 2020. I received a 1099-R showing the distribution. Box 7 was "2" indicating an early distribution with no penalty. This was rolled over directly from the Trad IRA to the Roth (both Fidelity). I was 57 in 2020 and self-employed with Sched C profit of $8500.
When entering the 1099-R in Turbotax I indicated it was a Roth Conversion. TurboTax shows this distribution as NON-Taxable. This seems incorrect to me. It was NOT a backdoor conversion. What would be the reason this would show as non-taxable?
It should be taxable. After you enter your form 1099-R, one of the questions will be What Did You Do With The Money From (name of broker)? You need to answer that you moved it to another retirement account, that you did a combination of rolling over, converting or cashing out the money, and then enter the distribution in the box that says Amount converted to a ROTH IRA account.
When you enter a code 2 Form 1099-R, TurboTax confusingly indicates that this distribution is not subject to any "additional tax," referring to the 10% excise tax (penalty) on early-distributions.
When I went to the underlying forms, the box was checked indicating it was being transferred FROM another Roth. This seems to be a programming error. I entered the $150k as the amount of a Roth CONVERSION. After I unchecked the box, I suddenly owed a bunch of tax, which was what I originally expected.
I did choose that "combination of things" answer. I then entered the $150k as a Roth CONVERSION. After submitting my question, I wen to the underlying form in T-Tax (sorry, don't know which one) and found that there was a box checked indicating that that the distribution was coming FROM another Roth. This was clearly in error and I don't understand why the box was checked. When I unchecked it, my tax due went from refund to quite a bit of tax due - which is what I originally expected.