401K to Roth IRA Conversion Reporting

[syoung123]

Hello - I used the 2021 TurboTax Premier to input the following as a "try-out" to see what tax forms were generated.

1.  From traditional 401K to Roth IRA (one 1099R and one 5498) - I added a new 1099R as follows:

    -  Box 1 and 2a = $20,000; box 2b not checked; box 7 = code "G", IRA/SEP/SIMPLE box not checked (this is a 401K distribution to Roth)

    -  The results are - form 1040 line 5a (Pension and annuities) shows zero dollar; 5b shows $20,000 with a printed notation "ROLLOVER" above "Taxable Amount"; income tax increased due to the distribution from 401K to Roth IRA; form 8606 was not generated (which was what you indicated in your earlier replies)

2.  From traditional 401K to Rollover IRA, then from Rollover IRA to Roth IRA (two 1099R and two 5498) - I added two 1099R as follows:

   -  1st 1099R (rollover of 401K to a Rollover IRA) - box 1 = $100,000 (full rollover out of the 401K to the IRA); box 2a = 0 (as non taxable); box 2b "taxable amount not determined" checked; box 7 = code "G"; IRA/SEP/SIMPLE not checked.

  -  2nd 1099R (from Rollover IRA to Roth IRA) - box 1 = $20,000 (partial conversion); box 2a = $20,000; box 2b not checked; box 7 = "7" (normal distribution as I am over 59 1/2); IRA/SEP/SIMPLE box checked (since this would be an IRA distribution to Roth.

-  The results are - form 1040 line 4a (IRA distributions) = 0; line 4b (Taxable amount) = $20,000 (the amount converted from the Rollover IRA to Roth); line 5a = $100,000 (rollover of 401K to Rollover IRA); line 5b = $0 (the rollover from 401K to a Rollover IRA is not taxable), but there is still a printed notation "ROLLOVER" above 5b "Taxable Amount"; income tax increased due to the $20,000 conversion from the Rollover IRA to Roth IRA

-  Note that Form 8606 was not generated with this scenario, which your previous reply indicated the conversion from an IRA to Roth would have to be reported in part II of Form 8606.  Did I input something incorrectly, or was because this would be a conversion from a "Rollover" IRA to Roth, not from a "traditional" IRA to Roth?)

Thank you again in advance.

[dmertz]

As long as you actually did mark the IRA/SEP/SIMPLE box, it seems that you did not properly indicate the Roth conversion when entering the code-7 form 1099-R.  You need to indicate that you moved the money to another retirement account, that you did a combination of rolling over, converting and cashing out, then indicate that you converted $20,000 to Roth.

[syoung123]

Hello, would I check the IRA/SEP/SIMPLE Box for both 1099Rs?  Per below, I did not check the box for the 1099R for the rollover of 401K to a Rollover IRA, but I checked the box for the 1099R for the Rollover IRA to Roth IRA with code 7 as normal distribution.

" 1st 1099R (rollover of 401K to a Rollover IRA) - box 1 = $100,000 (full rollover out of the 401K to the IRA); box 2a = 0 (as non taxable); box 2b "taxable amount not determined" checked; box 7 = code "G"; IRA/SEP/SIMPLE not checked.

  -  2nd 1099R (from Rollover IRA to Roth IRA) - box 1 = $20,000 (partial conversion); box 2a = $20,000; box 2b not checked; box 7 = "7" (normal distribution as I am over 59 1/2); IRA/SEP/SIMPLE box checked (since this would be an IRA distribution to Roth."

[dmertz]

The IRA/SEP/SIMPLE box is to be marked only on the code-7 Form 1099-R reporting the distribution from the traditional IRA, so it would seem that you did that correctly but incorrectly indicated the Roth conversion.

[syoung123]

Hello, I apologize that I don't quite understand - 

I double-checked that I entered the 1099R for the conversion of Rollover IRA to Roth for $20,000 - box 1 = $20,000 (partial conversion); box 2a = $20,000; box 2b not checked; box 7 = "7" (normal distribution as I am over 59 1/2); IRA/SEP/SIMPLE box checked (since this would be an IRA distribution to Roth.).  And TurboTax did not generate the form 8606. 

I thought for TurboTax input, I only needed to enter the 1099R.  I was told in earlier comments from other members that I only needed to enter the 1099R in the "retirement" sections.  Are there other section in TurboTax that I need to make additional entries (such in the "deductions and credit" section)?

[dmertz]

Report the Roth conversion by only entering the Form 1099-R and answering TurboTax's follow-up questions as I described in an earlier post above.  As I've said several times, if you got no Form 8606 as part of the tax return, you failed to indicate in those follow-up questions the amount that was converted to Roth.  It seems that you instead reported it as a rollover.

[syoung123]

Thank you again.  Yes, I did not select the right responses.  After I did the following in the next TurboTax screen - 

-  "moved the money to another retirement account" (original I selected "did something else with it", because I thought it asked if I moved the money to another tax-deferred account.)

-  "did a combination of rolling over, converting, or cashing out of the money (in this case, it would be "converting" to Roth)

-  How much, "amount converted to a Roth ITA account"

With that, TurboTax generated a form 8606 with which showed the converted amount (from Rollover IRA to Roth IRA) in part II.

Appreciated your help.