Help with Form 1099R.

[ri-solano]

Hello - in October 2022 I opened an IRA traditional with $2000 by mistake (I meant to open an IRA Roth). Later in December I asked the financial institution where I opened it to transfer or convert the $2000 into an IRA Roth. The financial institution opened an IRA Roth and transferred the funds from the IRA Traditional and closed it. I received a Form 1099R which shows the $2000 in Box 1 and Box 2a. It also shows an "X" in Box 2b "Taxable amount not determined". And it shows Code 7 "Normal distribution" in Box 7. It looks to me that I will be responsible for paying taxes on the $2000 even though I never withdrew the funds, it was just a transfer from the IRA Traditional to the IRA Roth. I contacted the financial institution and they said the Form 1099R I received is correct, that they need to report the $2000 as a normal distribution. They also mentioned that I might need to file Form 8606. Do I need to file Form 8606? Should I expect the financial institution to send me a corrected Form 1099R? How should I enter the information on Form 1099R in Turbo-Tax? Any feedback or guidance will be greatly appreciated it. Thanks!!

[JulieS]

No, you should not expect a corrected 1099-R, because the one you have is correct for the situation that you described. You need to enter it, report the conversion and the traditional IRA contribution. 

This is how to enter it in TurboTax:

1. Select Federal from the left side menu.
2. Select Wages & Income. 
3. Scroll down to Retirement Plans and Social Security.
4. Expand the section and click Start to the right of IRA, 401(k), Pension Plan Withdrawals (1099-R). 
5. Follow the steps to import or enter your 1099-R, or scroll down the bottom and select, Change how I enter my form. 
6. On the next screen, select Type it in myself, in the lower right corner.
7. Select 1099-R on the next screen and click Continue.
8. Enter your 1099-R on the next few screens. 
9. Continue until you get to Tell us if you moved the money through a rollover or conversion, select I converted some or all of it to a Roth IRA and click Continue.
10. Pick the first answer to the next question, "Yes, all of this money was converted to a Roth IRA."
11. Continue through the end of this section.  

Next, report your traditional IRA contribution and any basis from prior years:

1. Select Federal from the left side menu.
2. Select Deductions & Credits. 
3. Expand the list and scroll down to Retirement and Investments.
4. Expand the section and click Start to the right of Traditional and Roth IRA Contributions. 
5. Check both types of IRA accounts and then answer the question Yes, to Did you Contribute To a Traditional IRA?
6. Enter the $2000 as a traditional IRA contribution and then answer the remaining questions in the section. 
    

A Roth conversion is normally taxable, but you should either be able to deduct the traditional IRA contribution, or exclude part of the conversion because the contribution was not deductible. TurboTax will create a Form 8606 in your return. 

[ri-solano]

Thank you JulieS! Will follow the steps you outlined below.

[ri-solano]

Hi JulieS-

I followed the steps you outlined below. I got to a screen regarding "recharacterization" where I entered in a template details regarding the Traditional and Roth IRAs such dates, amounts, etc. and the reason why I transferred the funds from one to the other. Was it right or did I need to do this template with explanations? Thanks!

[JulieS]

Yes, that is right. The template just helps create a statement that meets the IRS requirements. No additional explanation is required.