We did a Roth conversion in 2024. This conversion is taxable for federal purposes, but it is NOT taxable for PA state income tax. However, that amount is showing up in my PA state income tax return (PA-40) on line 1a for “Gross Compensation” and I am unable to remove it.
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I entered the information into Turbo Tax exactly as written on the Form 1099-R provided by the Financial Institution. I have performed the steps to describe what we did with that money, so that the full amount was converted to a Roth. I also deleted that 1099-R (along with cache) and re-entered the info but my problem remained. The Form 1099-R under line 7 has listed this as a 7 - “Normal Distribution”. When I get my State tax form section to discuss retirement income, the program says to review the information about this retirement income and directs me back to the federal retirement area if I need to make changes. It seems to suggest that I need to make a basis adjustment to account for my rollover. I don’t see anywhere to do that at PA section nor federal section.
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I spoke with my financial planner & he told me that code 7 on the 1099-R is what they use for this type of transaction.
It looks like this problem was previously identified on March 24, 2022 when posted at 5:59 AM to the Turbo Tax Community forum. I can’t follow exactly how they got themselves out of this jam.
