topic We are being taxed $600.00 for a penalty for converting $10,000.00 ($5,000.00 each) to two Roth IRAs from our traditional IRA's. Why is this? in Retirement tax questions

We are being taxed $600.00 for a penalty for converting $10,000.00 ($5,000.00 each) to two Roth IRAs from our traditional IRA's. Why is this?

dbwhite76 — Tue, 03 Feb 2026 15:30:04 GMT

Re: We are being taxed $600.00 for a penalty for converting $10,000.00 ($5,000.00 each) to two Ro...

MayaD — Tue, 18 Mar 2025 19:00:44 GMT

There isn't a penalty for converting a traditional IRA to a Roth IRA. However, a conversion to a Roth IRA results in taxation of any untaxed amounts in the traditional IRA.

irs.gov

Re: We are being taxed $600.00 for a penalty for converting $10,000.00 ($5,000.00 each) to two Ro...

dbwhite76 — Wed, 19 Mar 2025 00:00:19 GMT

The taxes were paid when the money was converted. TurboTax came up with the Penalty because they Said that our AGI was zero, which obviously it is not.

According to the IRS, we can convert up to $7,000.00 each.

Re: We are being taxed $600.00 for a penalty for converting $10,000.00 ($5,000.00 each) to two Ro...

SusanY1 — Wed, 19 Mar 2025 00:30:02 GMT

If taxes are withheld at the time of the conversion, credit is given for that from the 1099-R entries. The full tax is then reconciled on the tax return when you file at the end of the year. It can be more or less than the withholding paid at the time of the conversion.

However, that is different from a penalty - so it sounds like something else may be going on here. Where are you seeing the $600 tax or penalty that is of concern? A little more detail may allow us to help you troubleshoot this better.

Re: We are being taxed $600.00 for a penalty for converting $10,000.00 ($5,000.00 each) to two Ro...

dbwhite76 — Wed, 19 Mar 2025 01:06:14 GMT

The $600.00 shows up on line 23 of the 1040 form. Turbo tax said it was a penalty for converting more than our AGI, which they said was zero. Our AGI is far more than the $10,000.00.

I thought it might correct itself when I finished, but it did not.

Thanks.

Re: We are being taxed $600.00 for a penalty for converting $10,000.00 ($5,000.00 each) to two Ro...

Opus 17 — Wed, 19 Mar 2025 01:12:41 GMT

@dbwhite76 wrote:

The $600.00 shows up on line 23 of the 1040 form. Turbo tax said it was a penalty for converting more than our AGI, which they said was zero. Our AGI is far more than the $10,000.00.

I thought it might correct itself when I finished, but it did not.

Thanks.

No, you read the message wrong. Turbotax said it was a penalty for contributing more than your AGI. Your mistake was entering the conversion as if it was a contribution. It is not. Conversions are only entered on the 1099-R page. After entering the 1099-R for the withdrawal half of the conversion, turbotax asks what you did with the money, and one of the choices will be "converted to a Roth IRA." Remove the contributions from your tax return and re-run the 1099-R interviews for both withdrawals.

Re: We are being taxed $600.00 for a penalty for converting $10,000.00 ($5,000.00 each) to two Ro...

dbwhite76 — Wed, 19 Mar 2025 01:51:59 GMT

Thanks, that took care of it.