Turbotax has not been updated to handle a QTP to Roth IRA transfer. The software is adding the amount to taxable income, it should not. Any way to fix this?

[CatinaT1]

If your rollover met all SECURE 2.0 Act requirements, it should not be taxed. If TurboTax is calculating a tax on your 529 converted to a Roth IRA, it is likely because you manually entered Form 1099-Q into the software, or because the transfer did not meet the strict IRS criteria for a qualified rollover.

Here are the 2025 tax regulations that must be met for this rollover to be tax-free:

• The 529 account must have been open for at least 15 years.
• The beneficiary of the 529 account and the owner of the Roth IRA must be the exact same person.
• The rolled-over funds (and any associated earnings) must have been in the 529 account for at least 5 years.
• The beneficiary must have earned income in 2025 that is equal to or greater than the $7,000 converted.
• The conversion must have been a direct trustee-to-trustee transfer.
• The rollover cannot exceed the 2025 annual Roth IRA contribution limit ($7,000 if under age 50; $8,000 if 50 or older) and counts toward the $35,000 lifetime rollover limit per beneficiary.

If your conversion meets all of the requirement above, IRS Publication 970 says that this is a non-taxable event and should not be reported on your tax return. Entering the Form 1099-Q into TurboTax triggers the software to treat the earnings as a non-qualified, taxable distribution.

To stop the rollover from being taxed, you must delete the form in TurboTax:

1. Select Tax Tools from the left-hand menu.
2. Select Tools.
3. Select Delete a form in the pop-up window.
4. Locate Form 1099-Q on the list and select Delete next to it.
5. Confirm the deletion and select Continue with my return.
6. You must retain your Form 1099-Q and the Form 5498 you will receive from your Roth IRA custodian in your personal records in the event of an IRS inquiry.

[dmertz]

In addition to omitting the Form 1099-Q you'll need to report the amount as an ordinary Roth IRA contribution on the beneficiary's tax return.

[Lynnie11]

It's 4/14/26, and I've been on the phone with my daughter for an hour trying to figure this out. And per the discussion on this topic, TT has not fixed this issue.  It is taxing the rollover from the 529Plan to the RothIRA as a distribution at both the Federal and state of California level. The solution stated by someone to not report the transaction on a Federal level makes so sense as this is a taxable event on the earnings in California (and several other states). Our solution, file an extension until we can get TT to tell us how to fill out the software forms correctly. Or find another software solution. Plus, she had to upgrade to another TT product to report the 1099-Q at an additional cost of $95.  So, WHEN WILL TURBO TAX HAVE AN UPGRADE TO THE SOFTWARE TO FIX THIS ISSUE????????

[MarilynG1]

Don't enter the QTP to Roth transfer in your tax return.  This is a non-taxable rollover, documented for you and the IRS by Form 5498.  The info on Form 1099-Q is for your records.  Unless you have a taxable distribution from your 529, you don't need to enter the 1099-Q in your return.  

Here's more info from IRS Pub. 970.

@Lynnie11 

[Lynnie11]

Ok, but California does tax the earnings on the rollover. So, it does need to be accounted for somewhere in the TT software. Also, a note or comment in the software giving an alert for what was stated below to save everyone time and frustration would be very helpful and user friendly.  Thanks for the information on the federal status. Much appreciated!