529 to Roth Rollover

Forum|Forum|1 year ago
January 23, 2025
2 replies
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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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catonyx

Level 2

@MayaD

I don't get it. Is this a flaw in TurboTax? I should be able to enter the forms in TurboTax (desktop in my case) and have it handled it correctly. The 1099Q was addressed to my daughter so I think it would be handled in her return, not mine. When I do this, it appears to be treated as income and taxable which I am 99% percent sure that is wrong. The whole point of the rollover is to avoid paying taxes. It looks like it is taxing the gains only which would make sense in other cases. There doesn't seem to be a question in TurboTax to handle this correctly.

JFW3Author

Level 4

It's lazy programming by Turbo Tax and maybe they will adjust it in time. For 2024, the consistent answer from Turbo Tax is not to input the 1099-Q. And yes, it would be handled on your daughter's taxes, which makes it more difficult because the Roth account owner will need to confirm with the 529 account owner that it is a qualified distribution. The Turbo Tax community helps with the work-around (i.e., not inputting). There are a couple of other instances with TT taking a lazy programming route. I use TT Business to complete a trust tax return and they do not have a form 1099-OID in the program. The answer is to adjust the 1099-INT to reflect the original interest discount (OID) shown on 1099-OID. Why not just have a 1099-OID form like they have in the personal tax return package. I've started an excel spreadsheet to double check TT. I've found too many instances if one does not know what to expect for taxes, the answer may be incorrect (and some have been user input error! And in my defense, a checkmark on some seemingly random box could make a big difference.)