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Roth Conversions

Hello - My question is centered around the use of the word "Distribution".  In 2023, I converted funds from a Traditional IRA to a Roth.   My corresponding 1099-R Box 7 is marked as a Distribution Code 7, described as Normal Distribution.  IRA/SEP/SIMPLE box is checked. 

I understand the conversion triggers the taxation regardless of whether I convert it and leave it parked in the Roth or actually withdraw the funds.  My question arises as I am seeing contraditions on several of my tax forms.    In the context of the 5 Year Rule, I have not yet passed the criteria of owning the Roth for 5 years.  I see no evidence on my forms that I am being penalized for taking a Distribution (even though the 1099-R says I took a Distribution).  My 8606 Part II documents the transaction as a "Conversion" .  8606 Part III does not list any "Distributions".  Therefore... Even though my 1099-R classifies the Conversion as a Distribution, Form 8606 lists the transaction only as a Conversion, with no actual Distribution (withdrawal). 

Bottom line:  Does the IRS know with certainty that I have not withdrawn the funds from the Roth?  Perhaps I've answered my own question.  Yet the contradictory language has me begging for confirmation.  🙂  Thank you for any assistance.

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1 Reply
JulieS
Expert Alumni

Roth Conversions

Yes, the funds leaving your Traditional IRA are a distribution. When they are properly converted to your Roth account, they are a conversion. 

 

That makes the distribution taxable, but not subject to a penalty.

 

The five-year rule doesn't apply since you didn't take a distribution from your Roth. 

 

The purpose of Form 8606 is to let the IRS know what‌ occurred with this distribution, which is that it's a conversion. 

 

Don't worry, the IRS will understand this. 

 

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