2025 Tax Year QTP to Roth IRA Conversion

[malchmalch]

I did a rollover of some 529 money into a Roth IRA in 2025.

TurboTax incorrectly decided that a good portion of the rollover was taxable income.

Yes, I checked all of the rules and checked and rechecked my data entry into TurboTax.

I spent (wasted) an hour on the phone with TurboTax support who really didn't understand the issue and introduced multiple red herrings. They wanted $60 to talk to an expert in order for me to report an error in their software. I gave up.

After that, since the return was largely complete, I ran a final error check. It said:

"You have indicated this is a QTP to Roth IRA transfer. Our program has not updated to support this yet."

For the benefit of others:

1. Looks like you'll have to wait for more updates.

2. If you have a legit 529 to Roth rollover, check that TurboTax has not treated some or all as taxable.

[DaveF1006]

To clarify. Were you able to complete your return?

[ETM]

A portion of the rollover is taxable income, at least that is my understanding.

It is a rollover -- sort of.

They call it a rollover, but it really isn't. Just a way of moving money from one account to another.

The money taken out of the 529 plan, assuming you meet all of the nitpicky requirements (not money contributed in the last five years, account open for more than 15 yrs, Roth IRA account in the name of the beneficiary, etc.) is considered a withdraw with the earned income taxable. The 'rollover' is now an authorized use. Hence the reason the 'rollover' is subject to the annual contribution limits. Only gets you around the income limits. With a Roth IRA you only have to pay tax on the earnings and by transferring the money, you lose track of the basis. So you pay the tax on the earnings from the 529 and then have a clean slate for the Roth.

But yeah--with you on why is it taking TurboTax so long to update to address QTP to Roth IRA Conversions. Not like this is a brand new thing.

[AmyC]

You are right about the very particular rules; but, I do want to comment that the earnings do rollover federally tax free. Which is what makes it different from a withdrawal. As long as you follow the annual and lifetime rules, there is no federal tax or penalty on the earnings.

For the ROTH, it is a clean slate and the entire rollover becomes the basis.

Box 4b is a rollover to ROTH.  It is either nontaxable in its entirety or there is a taxable component.

• A nontaxable 1099-Q should not be entered. The program wants to tax it. Tuck the 1099-Q into your tax folder. IRS Publication 970, Tax Benefits for Education states that nontaxable distributions should not be entered.
• Taxable 1099-Q should be entered. While entering, under Other Form 1099-Q Information, select that it was a rollover to ROTH IRA. Continue answering the questions.

@ETM 

[sseb1]

Can you please help me figure out how to account for the following:

1099Q shows 120000 QTP to Roth IRA

$5000 was withdrawn and sent directly to ROTH ira in Jan 2025 and marked as a 2024 contribution

$7000 was withdrawn and sent directly to ROTH ira in Dec 2025 and marked as a 2025 contribution.

I can't get turbo tax to let me recognize the $5000 2024 contribution as roth and not additional (excess) income

Thank you!

[sseb1]

Just reread previous answer that says non taxable 529 should not be entered.  Do I just not enter anything?

[MarilynG1]

No, if the Roth contribution was for the 529 Beneficiary, you don't report this in your tax return.  You'll receive a Form 5498 documenting the tax-free rollover for your records.  Unless you had a non-qualified distribution with taxable earnings on Form 1099-Q, you don't need to enter it in TurboTax.  Save it for your records also.

Here's more info on Form 1099-Q and from IRS Pub. 970  regarding rollovers.

@sseb1