529 to Roth conversion again ...

[ChuckF1]

Very useful information on this topic ...

Like many, I began converting for my son. He is the beneficiary of the 529. I am the owner. So - assuming that no IRS rules have been broken by initiating this 529 to roth conversion:

1. where is this handled / input in TurboTax Delux 2024?

2. who has to file this information, the owner (me) or the beneficiary (my son)? A 1099Q was issue with my son's name which is a first. I'm assuming he has to provide this information when he does his taxes.

Thanks for any insight, Chuck

[Bsch4477]

You should be aware of all of the rules which are discussed here 

https://www.journalofaccountancy.com/news/2023/jul/the-new-529-rollover-roth-ira.html

if all of the withdrawn funds from the 1099 Q were used for qualifying education expenses you don’t have to report that form on any return. 

[ChuckF1]

Thank you Bsch4477,

The funds were not used for a qualifying education expense, they were rolled over to a Roth IRA.

cheers,

Chuck

[billyboulder]

Did anyone answer the question...it's a 529 to Roth conversion. It should not be taxed and there are no screens in Turbotax that address this?  2024 was the first year this was allowed...I hope they have included this in their software

[MarilynG1]

Per Expert @DaveF1006 

"Here's what you need to know about the new 529-to-Roth rollover provision:

• The 529 plan must be open for at least 15 years.
• The lifetime limit for the rollover is $35,000 per beneficiary.
• The Roth IRA must be in the name of the beneficiary of the 529 plan.
• Any contributions made within the past five years (and earnings on those contributions) are ineligible to be moved into the Roth IRA.
• The annual limit on the rollover is the IRA contribution limit for the year, less any other IRA contributions.
  • For example, the current IRA contribution limit is $6,500. If the beneficiary made any IRA contributions, the rollover amount must be reduced by those contributions. Therefore, if the beneficiary contributed $2,000 to any IRA, the amount available for rollover is $4,500.
  • Consequently, getting to the $35,000 lifetime limit may take more than five years.
• The rollover must be a plan-to-plan or trustee-to-trustee rollover. This means you cannot take a check from the 529 plan to deposit into the IRA.
• The beneficiary is not subject to income limitations to contribute to a Roth IRA. For example, even if the beneficiary's income is over $153,000 (if single), the beneficiary can make a rollover from the 529 plan to the Roth IRA.

The beneficiary must have earned income, and the amount that can be rolled over is the lesser of earned income or the IRA contribution limit. Therefore, if the beneficiary is not working, no rollover is available because there is no earned income."

If you received a 1099-Q indicating a trustee-to trustee rollover, save it for your records.  You're not required to enter the 1099-Q into any tax return.  

The beneficiary should receive Form 5498, and if they contribute to their Roth in 2025, will use the rollover amount as their 12/31/2024 basis.

Here's more info on 529 Rollover to Roth in 2024. 

[Earlybird]

Hi - I am going through this myself, and Turbotax does not ask any questions about this when you enter the 1099Q.  It appears the only way to deal with this in Turbotax is to not enter the 1099Q at all (which I know has been stated by others), but I think there should have been changes so that you could enter it, and then indicate it was a transfer to a Roth.  

[ChuckF1]

Thanks to all for input & insight.

I agree it needs to be explicitly included somewhere in TurboTax, if for no other reason than to provide peace of mind that it’s being properly reported & recorded.

[AmyC]

The program is following the law. IRS Publication 970, Tax Benefits for Education states on 

Page 45: Don't report tax-free distributions (including qualifying rollovers) on your tax return.

You are required to keep the tax form with your tax records.

@Earlybird