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Level 2
posted May 16, 2021 12:36:47 PM

Traditional 401k Rollover to Roth IRA

Hi 

My father in law (70+) did a rollover of 20K RMD into a Roth IRA in 2020.

I assume he has to pay taxes based on current income and that is fine, but TurboTax is saying that contribution to the Roth IRA was too high ( above 7K and subject to 6% tax penalty. This does not seem right. Please advise.

Thanks

DKD

 

 

 

 

0 3 757
2 Best answers
Expert Alumni
May 16, 2021 12:59:24 PM

Please do not enter this as a Roth IRA contribution in the IRA contribution section under Deductions & Credits. 

 

Generally, you cannot convert an RMD into a Roth IRA but RMDs were waived in 2020. You must indicate to TurboTax that none of the distribution was RMD. If you already enter the 1099-R as RMD and changing your answer to the RMD question doesn't work then you have to delete and reenter the 1099-R form. Please follow the steps below to report the conversion.

 

For TurboTax Desktop:

  1. Click on "Search" on the right top and type “1099-R” in the box
  2. Click on “Jump to 1099-R”
  3. Continue until "About this Retirement Account. / Was this withdrawal an RMD for 2020?" and select "No, none"
  4. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account
  5. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"

 

For TurboTax Online:

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top right and type “1099-R”
  3. Click on “Jump to 1099-R” and enter your 1099-R
  4. Continue until "How much was a RMD?" and select "none"
  5. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA

 

Expert Alumni
May 16, 2021 3:09:21 PM

Yes, you can convert a 401k to a Roth IRA. But the Required Minimum Distributions (RMD) cannot be converted or rolled over (IRS). Only if you take out more than the RMD then the additional amount may be converted.

3 Replies
Expert Alumni
May 16, 2021 12:59:24 PM

Please do not enter this as a Roth IRA contribution in the IRA contribution section under Deductions & Credits. 

 

Generally, you cannot convert an RMD into a Roth IRA but RMDs were waived in 2020. You must indicate to TurboTax that none of the distribution was RMD. If you already enter the 1099-R as RMD and changing your answer to the RMD question doesn't work then you have to delete and reenter the 1099-R form. Please follow the steps below to report the conversion.

 

For TurboTax Desktop:

  1. Click on "Search" on the right top and type “1099-R” in the box
  2. Click on “Jump to 1099-R”
  3. Continue until "About this Retirement Account. / Was this withdrawal an RMD for 2020?" and select "No, none"
  4. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account
  5. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"

 

For TurboTax Online:

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top right and type “1099-R”
  3. Click on “Jump to 1099-R” and enter your 1099-R
  4. Continue until "How much was a RMD?" and select "none"
  5. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA

 

Level 2
May 16, 2021 2:28:01 PM

Thank you it fixed the issue.

 

Now for next year, can he do the same ? 

I was referring to this link which advises that it is ok to rollover a trad 401k to a Roth IRA.

Tax Article Link  

Thanks

DKD

Expert Alumni
May 16, 2021 3:09:21 PM

Yes, you can convert a 401k to a Roth IRA. But the Required Minimum Distributions (RMD) cannot be converted or rolled over (IRS). Only if you take out more than the RMD then the additional amount may be converted.