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Trad IRA to Roth IRA conversion deemed as excess Roth contribution

I converted part of my traditional IRA to my Roth IRA in 2018 (and plan to do the same for a few years), and Turbotax (TT) thinks the my conversion is an excess contribution to my Roth IRA. I don’t think this is a “backdoor Roth” since I made no contributions to my trad IRA in 2018, and I still have a balance left in my trad IRA at the end of 2018. All the money I took from my trad IRA went into my Roth IRA. I have no earned income—just investment income. 
 
I’m running TT 2018 Premiere on a Mac, and it’s fully updated as of today (Apr 11).
 
I have a 1099-R for the withdrawal of the funds from my trad IRA. The box 7 code is 2 (“early distribution, exception applies (under age 59 1/2)"), so I’m exempt from the 10% early withdrawal penalty for being less than 59 1/2. Is it possible my banker put the wrong code into box 2?
 
In the 1099-R interview section, the last two questions TT asks:
 
- What did you do with the money: I moved the money to another retirement account or returned it to the same retirement account.
 
- Which of the following applies: I converted all of this money to a Roth IRA account.
 
 
IRA Contributions section, here’s what I tell TT:
 
I have both a traditional and Roth IRAs.
 
I did not contribution to my traditional IRA.
 
I made no excess IRA contributions before 2018.
 
I made no non-deductible contributions to my traditional IRA.
 
This is not a repayment of a retirement distribution [I’m assuming its asking about my Roth, but nothing indicates that]
 
Enter your Roth IRA contributions. I enter the amount I converted. It’s the entire amount from the 1099-R.
 
Switch from a Roth to a traditional IRA: No [it’s asking about recharacterization here]
 
Did you open a Roth before 2018? No [opened in Dec 2018]
 
Value of Roth IRA on Dec 31, 2018: I enter the number. The value had gone up by $1.
 
Then TT declares the entire amount of my conversion is deemed an excess contribution to my Roth IRA and assesses penalties.TT says these apply to me because:
- Your contribution is over the allowed limit of $6,500 [I’m 57]
- You don’t have enough earned income (your contribution must be equal or less than your earned income)
 
Looking at the Forms mode in TT, it looks like Form 5329 is where TT computes the excess Roth contribution amount. On line 20 of this form, it asks for “regular Roth IRA contributions.” I don’t know if a conversion from a trad IRA is considered “regular” or not, but nowhere on the form does it mention contributions due to a conversion. TT puts the entire amount I moved to my Roth IRA onto this line, and it percolates down to line 24 to be the excess contribution.
 
Sorry for the long post. Any ideas?
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1 Best answer

Accepted Solutions

Trad IRA to Roth IRA conversion deemed as excess Roth contribution

This is NOT a IRA contribution.  Do not enter anything in the IRA  contribution section.   Go back and change the contribution amount to zero.  A Traditional IRA to Roth conversion is entered in the 1099-R interview only.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

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2 Replies

Trad IRA to Roth IRA conversion deemed as excess Roth contribution

This is NOT a IRA contribution.  Do not enter anything in the IRA  contribution section.   Go back and change the contribution amount to zero.  A Traditional IRA to Roth conversion is entered in the 1099-R interview only.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

Trad IRA to Roth IRA conversion deemed as excess Roth contribution

Also, may be worth checking that the 1099-R in Forms View matches the form you received
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