529 to Roth Rollover

Forum|Forum|1 year ago
January 23, 2025
20 replies
144 views

I met the requirements to do a 529 to Roth rollover in 2024 and moved $7000. I see the 529 plan issued a 1099-Q for this transfer to the Roth account owner. The only difference I note between this 1099-Q and the "normal" 1099-Q used to pay college expenses is that Roth rollover one has Box 4 "Trustee-to-trustee" transfer checked. Does the Roth account owner have to report the 1099-Q? And if so, how does Turbo tax know not to add the earnings amount to their taxable earnings?

MayaD

Alumni - Intuit

If distributions from the 529 plan are not taxable, do not enter the 1099-Q forms.

For calendar years beginning after 2023, funds from an established 529 account can be transferred tax-free and penalty free to a Roth IRA for the beneficiary of the 529 account.

The 529 account must have been open for at least 15 years.
The beneficiary of the 529 account and the owner of the Roth IRA must be the same person.
The amount of the rollover is limited:
- Annual rollovers are subject to applicable Roth IRA contribution limits. $ 7000- $8000( 50 or older)
- Rollover amounts from all 529 plan accounts may not exceed $35,000. Lifetime limit
The money transferred must have been in the account for at least five years, and the amount can’t exceed your balance from five years prior.
A Roth rollover from my529 must be paid in a trustee-to-trustee transfer. An account owner can't take a withdrawal for themselves and then send the money to a Roth IRA account

my529

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JFW3Author

Level 4

Just not inputting the 1099-Q will work, but there is a certain hesitation to simply not input a validly issued tax form into Turbotax. It would be better to input the 1099-Q and then proactively indicate (assuming it meets the criteria) that it is a qualified 529 to Roth Rollover. Better procedure and better documentation. All they need to do check that the trustee-to-trustee transfer box is checked and then allow users to indicate whether it was a qualified 529 to Roth Rollover. If so, then the earnings amount would not be taxable.

AmyC

Alumni - Intuit

No, that goes against the IRS. The IRS does say to keep the form and documents in case they have a question. IRS Publication 970, Tax Benefits for Education states:

If the entire 1099-Q went to qualified expenses, room and board, tuition, etc then you do not need to enter the form. Tuition paid for the first 3 months of the next year also qualify, see page 12, What Expenses Qualify, and page 52 for qualified distributions.

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

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