Roth Indirect Rollover Reporting in TurboTax

[stevegsorrentino]

Hi,

I made a $6,000 withdrawal from my Roth IRA in 2021 and returned it within 60 days.  Vanguard told me this is considered an “Indirect Rollover Contribution” and it will be reported on Form 5498 in Box 2 - "Rollover Contributions".

Vanguard’s 1099-R also reported this $6,000 as a distribution in Box 1 – Gross Distribution, and I have reflected this appropriately on Form 1040 – Lines 4a and 4b.

My question is where can I enter the Form 5498 – Box 2 amount in the TurboTax software, so that my tax return is consistent with the forms the IRS will receive?

I tried many things, but nothing seems to work.

Thanks,

Steve

[fanfare]

you can't enter Form 5498 into TurboTax.

any history or other status you enter has to be via the 1099-R followup questions.

[stevegsorrentino]

Thanks for your response.

I think you missed the point of my question. I realize Form 5498 doesn't get entered in TurboTax. My question is where can I enter the Form 5498 – Box 2 amount in the TurboTax software, so that my tax return is consistent with the forms the IRS will receive?

Or think about it another way and forget about the 5498 for the moment. Where does my $6,000 Roth Indirect Rollover Contribution get entered in TurboTax?

I see nothing in the Form 1099-R in TurboTax that could be used for this purpose. That is why I am asking for your help. The interview questions are useless. When I answer them, TurboTax wants to count the rollover as a contribution and then it tells me I contributed too much to my IRAs. That is incorrect information and causes all kinds of issues in TurboTax

I am hoping someone can read my question carefully and possibly provide a thoughtful and complete answer.

Thanks,

Steve

[fanfare]

"TurboTax wants to count the rollover as a contribution and then it tells me I contributed too much to my IRAs."

You didn't say a peep about having a problem that your 1099-R entry resulted in tax that shouldn't be there.

[VolvoGirl]

You don't enter it as a contribution under Deductions.  After you enter the 1099R it will ask what you did with it.  You say you rolled it over even if you put it back into the same account.  What code is in box 7?  @dmertz  can you help?

[VolvoGirl]

If you enter it right you should have 0 taxable amount on line 4b with the word ROLLOVER by it.  

[dmertz]

I would expect this Form 1099-R to have code J, T or Q and no other codes.  After you enter the details of the Form 1099-R, TurboTax will ask what you did with the money.  Answer that you moved the money to another retirement account (or back to the same account), then indicate that you rolled over the entire amount.  TurboTax will include the entire amount on Form 1040 line 4a, will exclude it from the amount on line 4b and will include the word ROLLOVER next to the line.

[stevegsorrentino]

Thanks for your response.  It works by using the Form 1099-R.  But then, it informs me that I have to enter the info on two separate 1099s to make TurboTax treat it correctly.  

Very vague on the part of the TurboTax software here.  Not at all obvious that the "reversal of a withdrawal" (aka "rollover contribution") is handled in TurboTax on an income form (i.e., 1099-R).  The interview questions were not precise.  Then, the splitting up of one Vanguard Form 1099-R ito two TurboTax 1099s to make TurboTax work properly is unintuitive and a nuisance.

The whole thing is very frustrating, but at least I have a way forward.  Thank you for that response.

Steve

FYI - The Box 7 code is T - Roth IRA distribution, exception applies.

[dmertz]

But then, it informs me that I have to enter the info on two separate 1099s to make TurboTax treat it correctly.

.

.

.

FYI - The Box 7 code is T - Roth IRA distribution, exception applies.

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That makes no sense.  There is no situation where a code-T Form 1099-R would need to be split in TurboTax.   Splitting is only required for distributions that can be rolled over to two different types of accounts, but a code-T distribution can only be rolled over to a Roth IRA, either fully or partially.

By law, this is not really a reversal of the distribution, it's a rollover.  Putting the money back into the Roth IRA does not erase the fact that there was indeed a distribution since this action is still subject to the one-rollover-per-12-months rule.  Because there was a reportable distribution, any tax software needs to ask what you did with the money to determine if you did a rollover.  There is no other logical way to handle this because the distribution and rollover are legally linked.

[stevegsorrentino]

I agree with all your comments.

My issue really is about the software not asking the questions clearly enough so the user could understand what is being requested.  Also, the 1099-R form and all its worksheets are terrible, especially the B-1 to B-8 lines.   I have quite a bit of experience in taxation and had to go back to IRC to figure out how to answer the questions to get TurboTax to treat everything correctly.  And still, I had to answer some questions "incorrectly" to get the correct tax result.  Not something the average user would be able to do.

I'm a long term TurboTax user (20+ years) and I really like the software.  It's certainly better than the competition.  But...

There have been numerous time over the years where the interview questions caused an incorrect tax result because of the vagueness of the Interview questions or worksheet questions.  As a result, I resorted to reproducing my taxes in Excel before I submit them.  In some cases, I've had to make corrections in TurboTax up to $5,000 in tax liability in one direction or another.

Also, there have been many cases over the years when I knew the correct tax treatment of an item, but had to figure out how to "stump" TurboTax into getting the correct tax results.  A user shouldn't have to spend time figuring out how to find workarounds to get the software to produce a correct tax result.

I'm venting here because it's been a tough TurboTax tax year for me, where there were at least three maddening things I had do to cause TurbotTax to get the correct result in spite of itself, and it makes me wonder how someone with less experience might be able to figure this out.

Thanks,

Steve

[dmertz]

The TurboTax editors seem to have a pride-in-authorship bias.  They don't seem to be very accommodating of any suggestions that particular wording is vague or misleading.  There are many examples.