topic Transfer from Keogh plan to Roth in Retirement tax questions

Transfer from Keogh plan to Roth

mariecj56 — Tue, 07 Jan 2020 20:55:59 GMT

Last year I transferred money from my Keogh plan to my Roth IRA intending it to be the (then) current year contribution, but Fidelity informed me that it was a recharacterization, not a contribution, and that I was still entitled to make the contribution. I've now accounted for the actual contribution in TurboTax, but I can't figure out where in TurboTax to report the recharacterization from the Keogh to the Roth so that I can update my Roth IRA basis on Form 8606. Help?

Re: Transfer from Keogh plan to Roth

dmertz — Tue, 07 Jan 2020 23:02:39 GMT

That makes no sense. You are't permitted to recharacterize from a Keogh plan to a Roth IRA, you can only do a taxable rollover from a traditional Keogh plan to a Roth IRA. One is only permitted to recharacterize current-year contributions to a regular traditional IRA to be contributions to a Roth IRA or recharacterize current-year Roth IRA contributions to be contributions to a regular traditional IRA.

Moving money from a Keogh plan to a Roth IRA can only be a taxable rollover. either by direct rollover (code G in box 7 of the Form 1099-R) or by indirect rollover (code 1, 2 or 7 in box 7 of the Form 1099-R). Entering either one of these and indicating that the money was moved to a Roth IRA will result in TurboTax treating the amount as conversion basis.

However, from your description it doesn't even sound like you did a rollover. It sounds like you took a regular taxable distribution from your Keogh plan (code 1, 2 or 7) and simply used the money to fund a new regular IRA contribution. Given what Fidelity said, perhaps you actually made a regular traditional IRA contribution with the intent to convert that money to Roth (a so-called backdoor Roth) but Fidelity actually performed a recharacterization of your traditional IRA contribution.

Re: Transfer from Keogh plan to Roth

mariecj56 — Thu, 16 Jan 2020 17:45:44 GMT

No, this question has *nothing* to do with a traditional IRA. I don't have one and do not want one. Fidelity just sent a tax form (5498?) that describes it as a rollover contribution.

Re: Transfer from Keogh plan to Roth

AmyC — Thu, 16 Jan 2020 21:00:49 GMT

Please reply with which boxes are marked on your Form 5498 to help clarify the situation, along with any other information to help clear things up.

Please see this link on Form 5498 and see which boxes you have marked on your form 5498.

What Is IRS Form 5498: IRA Contributions Information

A Keogh is a pre-tax plan that is similar to 401K and IRA. Here is what the IRS says about a Keogh, in pub 560.

Re: Transfer from Keogh plan to Roth

dmertz — Thu, 16 Jan 2020 21:17:28 GMT

So it was not a recharacterization as originally stated and was instead just a taxable rollover from the traditional account in the Keogh plan to the Roth IRA.

Near the end of January you'll receive reporting the distribution from the Keogh plan a Form 1099-R that you must enter into TurboTax. If the Form 1099-R has code G in box 7, indicate that you did not roll the money over to a Roth 401(k) but that you did roll the money over to a Roth IRA. If the Form 1099-R instead has code 1 or 7, indicate in the follow-up that the money was from a qualified plan, that you moved the money to another retirement account and indicate the amount that you converted to a Roth IRA. In either case TurboTax will include the taxable amount on Form 1040 line 4d.

The Form 5498 showing this as a rollover contribution simply acknowledges that you completed the rollover from the Keogh plan to the Roth IRA. The Form 5498 itself is entered nowhere in TurboTax.