Roth Conversion

GmFinDoctr — Sat, 25 Mar 2023 18:48:42 GMT

I converted $18,000 from my IRA to a Roth in 2022. I also had 22% taxes withheld during the conversion. The custodian issued two 1099R's - the first with the gross amount of $14,040 (Distribution code 2) and the second with a gross amount of $3,960 with taxes withheld of $3,960 (Distribution Code 1). When I input it into the software, the system generates a 10% penalty since I am under 59 1/2. I should not be paying a penalty since I converted the whole amount. How do I correct it in the software?

Thanks

Re: Roth Conversion

DanaB27 — Sat, 25 Mar 2023 19:01:15 GMT

Please be aware if you didn't replace the taxes withheld with other funds then this is considered a cash distribution and will be subject to the 10% early withdrawal penalty.

How much was actually put in the Roth IRA? If you put the full $18,000 then you indicate for both Form 1099-R that the funds were converted. But if you only put $14,040 into the Roth IRA then the $3,960 are considered a cash distribution and subject to the 10% penalty.

To enter the conversion:

Click "Federal Taxes" on the top and select "Wages & Income"
Click "I'll choose what to work on"
Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)"
Answer "Yes" to the question "Did You Have Any of These Types of Income?"
Click "I'll Type it Myself"
Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
Click "Continue" and enter the information from your 1099-R
Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
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"
On the "Your 1099-R Entries" screen click "continue"
Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

Re: Roth Conversion

GmFinDoctr — Sat, 25 Mar 2023 19:16:40 GMT

Makes sense. Thank you for your prompt reply.

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Roth Conversion

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