401K Direct Conversion, to Roth IRA, 1099 Code G, Form 8606, Page 2, Part II

[StarGirl18]

I did a 401K direct conversion to my Roth IRA, 1099 had Code G. I paid the taxes on my tax return, do I need to fill out Page 2, Part II of Form 8606? I got conflicting answers, most said no, IRS Pub, says if it is a rollover to an IRA, then converted  to a Roth, yes.  Code G is a rollover, but it didn't go into my pre tax IRA account went into my Roth IRA.  Tax Return due date almost here, what to do?  If not how does the IRS keep track of the 5 year rule?

[MaxA1]

Yes, Form 8606, Part II will need to be filled out.  When entering your 1099-R information, you will be asked questions about this that'll prompt From 8606 to be populated.  Once you've answered all the relevant questions on the 1099-R screen, you shouldn't need to do anything else on this.

Here are some ‌links that may have more useful info for you:

• Where do I enter my 1099-R?
• What's Form 1099-R?

[dmertz · Accepted solution]

This transactions is not to appear on Form 8606.  Form 8606 Part II only applies to Roth conversions from traditional IRAs.  A 401(k) is not an IRA.  ( @MaxA1 , this distribution was not from a traditional IRA.)

With regard to tracking Roth IRA basis:

While Form 8606 does report Roth conversions from traditional IRAs, it is not useful in tracking your Roth IRA conversion basis over the years.  Conversion tracking is your own responsibility.  TurboTax does help you with that by keeping track of your basis on TurboTax's IRA Information Worksheet.  TurboTax will use that Information whenever it becomes necessary for TurboTax to prepare Form 8606 Part III.

The IRS does not track your basis.  If the IRS ever suspects that you have misapplied basis on Part III of Form 8606 or that you have treated a distribution as a qualified distribution that they believe is nonqualified, they will ask you to provide records that support your position.  With regard to the tax code, you are essentially treated as guilty until proven innocent by the documentation that you provide in response.  Supporting documentation would generally need to be records of the individual transactions, not summaries of transactions.  (The information on Part III of a Form 8606 already reflects a summary of the transactions, so if the IRS is already questioning that, a summary is not enough.)

[StarGirl18]

The rollover conversion came from my 401k, not a ""traditional IRA," so why would I need to fill that out? The key word is traditional. I paid the taxes, it went into my Roth IRA.  Please explain why I need to fill out Part II of 8606?

[dmertz]

You don't.  @MaxA1 simply provided an incorrect answer.