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Level 3
posted Jan 8, 2025 5:13:43 AM

529 Rollover to Roth in 2024 - how to report on tax return

Hello - I don't have the 1099Q yet but wanted to know how this gets reported in Turbotax to reflect that the distribution is not taxable.  I tried to do a mock up of the 1099Q with the data I have, but I didn't see an option in Turbotax to distinguish this type of transfer. 

 

Thanks

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24 Replies
Level 2
Jan 19, 2025 4:26:07 PM

I have the same question. Specifically, does the beneficiary report the 529 to Roth IRA transfer or the account owner report the transfer?

 

I have two 529 accounts for my two sons. I executed transfer for each of their 529 accounts into their Roth IRA accounts. The custodian of the accounts, Fidelity, issued two 1099-Q forms for the transfers in my account.

 

1. One is address to my son with his SSN, and box 6 of the form is unchecked (meaning recipient is the designated beneficiary).

 

2. The other one is address to me, the account owner, with my SSN, and box 6 of the form is checked (meaning the recipient is NOT the designated beneficiary).

 

One of these forms must be incorrect.

 

It made me wonder who should report the transfer in TurboTax. Me, the 529 account owner? Or my sons, the beneficiaries of the 529 accounts and the owner of the Roth IRA accounts?

 

Thanks.

 

 

Level 15
Jan 19, 2025 7:59:23 PM

I'm not seeing how to do it. I have desktop (download) Deluxe.  I have flagged this issue to the TurboTax Moderators.  I'll post here, when I hear from them.

 

In the mean time, I believe this statement still applies:

Just don't enter the 1099-Q in TurboTax.  When the box 1 amount on form 1099-Q is fully covered by expenses, or ROLLED OVER to another qualified account, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records (the work sheet isn't going to tell you anything that will help with an IRS inquiry).  You'll need to show it went to another trustee.  

 

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution." 

 

But, you need to be sure that you meet all the new rules:

  • $7000 yearly limit
  • Your 529 savings account must be open for over 15 years before funds can be rolled over into a Roth IRA. 
  • It must be a trustee to trustee rollover (the trustee to trustee rollover box will be checked on the 1099-Q)
  • the Roth IRA must be in the beneficiary’s name

  • 529 contributions made within the preceding five years cannot be rolled over.

  • Beneficiary must have earned income that year of at least the amount transferred

  • $35K lifetime maximum (2024 is the 1st year that the Roth rollover is allowed, so this isn't an issue yet)

 

 

 

 

 

Level 15
Jan 19, 2025 8:28:59 PM

Q. Does the beneficiary report the 529 to Roth IRA transfer or the account owner report the transfer?

A. Only the beneficiary.

 

Q.  The other one is address to me, the account owner, with my SSN, and box 6 of the form is checked (meaning the recipient is NOT the designated beneficiary).

A. That's not right.  Ask Fidelity for an explanation. If the 529 beneficiary is different from the 529 owner, the Roth IRA must be in the beneficiary’s name. 

 

 

Level 2
Jan 21, 2025 8:23:55 AM

Thank you for the response.

 

I called Fidelity and they agree the 1099-Q that addressed to me, account owner, and using my SSN does not look right.

 

Though they said it doesn't matter since this is a qualified withdrawal and Fidelity doesn't report the 1099-Q to IRS 🤔.  My son will not need to submit the 1099-Q in the tax return.

 

The form is purely for my (or the beneficiary) record, and the key info is box 4 trustee-to-trustee transfer is checked.

 

I asked them to update the form anyways to fix the TIN and address to the beneficiary, and feel some pushback.

 

Regardless, I assume my son just need to report the amount transferred as Roth IRA contribution in his TurboTax Deluxe Desktop version. If I recall correctly, TT does ask "Do you have any other forms?" at the end and I will tell him to type in 1099-Q to see if there are additional steps required.

 

Thanks again.

Level 3
Jan 22, 2025 6:57:27 AM

OK I did enter the 1099Q - just received - to see again if there was an option to reflect as a rollover to a Roth.  There is not, and it computes the earnings as taxable income.  I am concerned about receiving an IRS notice for this later since it will appear as unreported income.  I am surprised there is no mechanism on the return to reflect this kind of transfer.  I could delete the form entirely but that doesn't seem right to me.  Will there be further updates on this from Turbotax?  Thanks

Level 15
Jan 22, 2025 7:09:39 AM

Q.  Will there be further updates on this from Turbotax? 

A.  Yes, they will announce it in any updates and I plan to post to this particular discussion, when they notify me. 

 

Q. I am concerned about receiving an IRS notice for this later since it will appear as unreported income.  

A. No. You are no more likely to hear from the IRS if you don't enter the 1099-Q.   It's just the opposite, if you enter the 1099-Q, you're more likely to make a mistake that will trigger a flag.

 

References:

  1. On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution." 
  2. IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.

 

I was somewhat surprised to hear that Fidelity doesn't send the 1099-Q to the IRS, when they know the distribution is qualified. 

 

 

 

Level 2
Jan 22, 2025 4:26:19 PM

Fidelity just called me and told me their back-office team would not update the incorrect 1099-Q for the transfer. The one that addressed to me (529 account owner) and used my SSN, instead of my son name and SSN (529 beneficiary and Roth IRA owner).

 

The Fidelity associate again told me for qualified transfer, I don't have to report the 1099-Q, and they don't report qualified transfer to IRS and do not have instructions to make the correction. I told him I will call Fidelity if I get flagged by IRS. LOL

Level 3
Jan 22, 2025 7:11:52 PM

For reference, Vanguard only issued one 1099Q in the name of my daughter/beneficiary/Roth owner. What Fidelity  did and is standing by doesn’t make sense. I am not a believer that they don’t report these to the IRS. Distributions for qualified educational expenses are definitely reported. Is it your impression that they are just saying trustee to trustee transfers are not reported?  I’ll ask Vanguard about whether they report this to the IRS. 

Level 2
Jan 22, 2025 8:56:20 PM

Thank you @Earlybird for the info. The Fidelity associate kept insisting that they don't report trustee-to-trustee transfers and qualified withdrawals to IRS. It does sound dubious because how do they know it is a qualified transfer or withdrawal. I am trying to get it in writing, but Fidelity hides the feature to send them message very well. They want me to call or chat with their virtual or live agents.

 

Also, for your reference. I made three 529 to Roth IRA transfers for my two sons and my daughter in 2024. My two sons 529 accounts are with Fidelity, and they got one right (issued to the beneficiary) and one wrong (issued to me).

 

For my daughter, I paid tuition and made a 529 to Roth IRA transfer. She just graduated, and the transfer met the rules (held for > 15 years, last contributed > 5 years ago, etc.). I received two 1099-Q forms from the firm where her 529 account is held. One to my name and SSN for the tuition withdrawal (box 4 unchecked and box 6 checked). One to her name and SSN for the Roth IRA transfer (box 4 checked and box 6 unchecked).

 

Thanks again. I will let you know if I get Fidelity to respond in writing that they don't report the 529 to IRA transfers to IRS.

Level 3
Jan 23, 2025 6:37:45 AM

IRS Publication 970, page 54 says

"Don't report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040, 1040-SR, or 1040-NR. These aren't taxable distributions."  When it refers to the above criteria, one of the rollover types is the transfer to a Roth IRA as long as it meets all of the criteria (explained on page 53 of pub 970).

 

From past experience with 529 plans and the IRS, I am not convinced they won't routinely consider this unreported income that you have to explain. But their publications support the idea that none of this gets reported.  I just hope that when this is reported to the IRS by the institutions, that the IRS understands what they are seeing.

Level 3
Jan 23, 2025 9:47:14 AM

OK for what it's worth, Vanguard has confirmed that they do report these 1099Q trustee to trustee to the IRS.

They also told me to file when I have the Form 5498 which should help, but those forms are not published until after the tax return deadline.  Again, from my earlier post, the IRS publication says this is not a taxable event and not to report it, but the reality of not reporting income (even when you are correct) can cause IRS notices. 

Level 4
Feb 5, 2025 11:15:22 AM

Hal_Al - thanks for your input on this, hopefully TurboTax gets this all updated and working correctly. One caveat to your explanation that I have, is that we took a larger 529 distribution than can be rolled into a Roth or used for qualified education expenses. The 1099-Q will get reported by Scholarshare (in CA) and the Roth contribution piece of it was not trustee to trustee in this case, but done as separate steps and in 2025 (for 2024 contribution).  Your other points apply, but I assume I'll need to report the 1099-Q distribution amount (in full to tie to the 1099-Q I expect) and then also the Roth contribution and somehow net the taxable income down by the Roth contribution amount. Does that all sound correct? Or maybe can report the net 1099-Q withdrawal after the Roth contribution, but that wouldn't tie to what the 529 custodian reports. What do you think the proper treatment here is? Thanks again!

Level 15
Feb 5, 2025 1:05:20 PM

Q.  What do you think the proper treatment here is? 

A. Its all new and I'm no expert.  But, I think you've made a mess by not doing a trustee to trustee transfer for the Roth rollover.. Technically, you don't qualify, which will make it taxable. If you plan to leave it alone, yes you'll have to use a workaround in TT.  Since it was done in 2025, you may want to look at trying to reverse/undo it and then doing it right

New Member
Feb 19, 2025 2:18:12 PM

Today's date 2/18/25 - Turbotax still doesn't have this updated in the program. It does need to be updated/ fixed, so hopefully the message gets through to the software writers.

Level 3
Feb 19, 2025 6:24:07 PM

My understanding is that nothing is going to be updated in Turbotax regarding this.  

 

 

New Member
Feb 20, 2025 10:20:34 AM

There is one other consideration when determining whether to include the 1099-Q on the tax return for the recipient/beneficiary in connection with the 529 Rollover to Roth treatment: How that connects to the Credit for Qualified Retirement Savings.  We rolled over funds left in our older son's 529 to his Roth and he received a 1099-Q (all properly completed by Virginia529).  However, this amount should be considered a Roth contribution, which permits him to do the calculation for the Savers Credit (he finished college years ago).  As long as you treat this as a rollover in TurboTax, the earnings reflected on the 1099-Q are not taxable and the Savers Credit can use this amount for the calculation.  If you decide not to enter the 1099-Q, you lose the option of showing the Roth contribution when calculating the Savers Credit.

Level 15
Feb 20, 2025 10:30:33 AM

" If you decide not to enter the 1099-Q, you lose the option of showing the Roth contribution when calculating the Savers Credit."

 

That assumes that TT will somehow automatically enter the Roth contribution from the 1099-Q area. I don't think that's a sure thing.  You still have the option of entering the Roth contribution in the IRA contributions area.

 

The IRS web site says "Rollover contributions do not qualify for the (Saver's) credit." Although they don't specifically address the 529 to Roth "rollover". https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-credit-savers-credit

Level 15
Feb 23, 2025 10:03:09 AM

The response I got, from TT, is:

"Enhancement requests such as these are handled post-season, so there will not be an update before then."

Level 1
Feb 23, 2025 12:00:03 PM

This is a total mess and Turbox tax is giving answer in circles vs fixing the Turbox tax program. 
Tax payers will be on the hook to justify the mismatch and incorrect recording of 529-Account to direct rollover to Roth IRA (Trustee to Trustee).

Turbo tax Premier desktop version should provide step by step instruction to offset 1099-Q amounts to Roth IRA contribution.  

What is the point of using turbo tax (digital solution) if it cannot simply balance 529 rollover (trustee to trustee) to Roth IRA deposit ?

Can someone from Turbo tax escaltes this issue as a high priority item and provide proper resolution with software update vs. giving some answers which does not make sense (garbage answers) ?

Thanks.

Level 15
Feb 23, 2025 12:26:17 PM

Q. Can someone from Turbo tax escalate this issue as a high priority item and provide proper resolution with software update vs. giving some answers which does not make sense (garbage answers) ?

A. No. 

You've got your answer.  You treat it as a rollover or you just don't enter it. You have to verify, by yourself, that you qualify, as there is no qualifying TT interview.

 

The TurboTax interview doesn't directly cover this, yet (there is a workaround). They're working on it, but it will not be ready for this tax season.  In the meantime, I believe this statement still applies:

Just don't enter the 1099-Q in TurboTax.  When the box 1 amount on form 1099-Q is fully covered by expenses, or ROLLED OVER to another qualified account (including a Roth IRA), TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records (the work sheet isn't going to tell you anything that will help with an IRS inquiry).  You'll need to check the "trustee to  trustee  rollover" box at the 1099-Q screen. 

IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.

 

But, you need to be sure that you meet all the new rules:

  • $7000 yearly limit
  • Beneficiary must have earned income that year of at least the amount transferred
  • Your 529 savings account must have been open for over 15 years before funds can be rolled over into a Roth IRA. 
  • It must be a trustee to trustee rollover (the trustee to trustee rollover box will be checked on the 1099-Q)
  • the Roth IRA must be in the beneficiary’s name
  • 529 contributions made within the preceding five years cannot be rolled over
  • $35K lifetime maximum (2024 is the 1st year that the Roth rollover is allowed, so this isn't an issue yet)

 

 

 

Level 3
Mar 9, 2025 10:56:51 PM

A couple of notes:

* On the TurboTax Home and Business desktop version, I was able to edit the form for the 1099-Q and click that the beneficiary and recipient were the same. I believe that that helped keep it from being listed as taxable.  I had to do that manually, not through the interview.

* I tried entering only the 1099-Q, and it did not impact the taxable income in any way. Unfortunately, the TurboTax IRA Information Worksheet that tracks the basis in Roth IRA contributions did not list any Roth IRA contributions from the 529-to-Roth rollover, and the basis was not updated there.

* I tried adding a Roth IRA contribution for the amount of the rollover, and there was no tax consequences. However, the basis information for the Roth IRA is again wrong since the basis in the rollover is only part of the amount rolled over. The basis information for the rollover is on the 1099-Q form, so TurboTax should be able to compute that correctly (once they update the program).

 

I would like TurboTax to correctly track my daughter's Roth IRA basis. If that can be corrected, I would be grateful.

Expert Alumni
Mar 12, 2025 7:18:12 AM

I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. This will help us send to developers if an issue does need to be corrected.  You can send one to us by following the directions below:

 

TurboTax Online:

  1. Sign into your online account.
  2. Locate the Tax Tools on the left-hand side of the screen.
  3. A drop-down will appear. Select Tools
  4. On the pop-up screen, click on “Share my file with agent.”
  5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
  6. Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

  1. Open your return.
  2. Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent” *
  3. This will generate a message that a diagnostic copy will be created.  Click on OK and the tax file will be sanitized and transmitted to us.
  4. Please provide the Token Number (including the dash) that was generated in the response.

*(If using a MAC, go to the menu at the top of the screen, select Help, then, “Send Tax File to Agent”)


 @MollyShr 

Level 3
Mar 12, 2025 9:44:18 AM

Here's the token number:  583880740-32372132

 

In this version, I report the 529-to-Roth both on the 1099-Q and as a Roth contribution. 

It also has the wrong Roth contribution summary basis information if I just report it on the 1099-Q, which is what I think would make the most sense from a user perspective. In that case, the summary has no information about the current year contribution.

 

Expert Alumni
Mar 12, 2025 1:52:42 PM

This is being reviewed by developers for an enhancement.  We will provide an update soon.  

 

@MollyShr