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Traditional IRA to Roth Conversion - Form 5498 from 2022 tax year and 1099-R is from 2023 tax year....what should I do to avoid turbo tax think my 1099-R distribution is income?

During 2023 I did a Traditional IRA to Roth Conversion

 

I opened a Traditional IRA and deposited $6000 post tax dollars into it, then the next day I converted it to Roth (liquidated my account $5992.74) - both Traditional IRA and Roth are with the same financial institution.

 

I was under the impression I won't owe any taxes but when I entered my 1099-R I received from my financial institution into TurboTax. I now owe taxes? I see a significant drop in my estimated refund. The box 1 on my 1099-R is $5992.74. And Turbo Tax is treating this as income but I think that should not be the case since I contributed the initial $6000 dollars are post tax money..

 

I feel like I am missing something. How can I indicate in Turbo Tax that these dollars have been taxed already?

 

 

edit - 

 

Since I made the initial contribution 03/02/2023 - my form 5498 that indicated I deposited $6000 is counted under 2022 Tax year

 

The Roth conversion happend  on 03/03/2023 and my form 1099-R is counted as my 2023 Tax year 

 

....what should I do?

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1 Best answer

Accepted Solutions
DanaB27
Employee Tax Expert

Traditional IRA to Roth Conversion - Form 5498 from 2022 tax year and 1099-R is from 2023 tax year....what should I do to avoid turbo tax think my 1099-R distribution is income?

You stated that you made the $6,000 contribution for 2022 in 2023, therefore, you should have entered the nondeductible traditional IRA contribution on your 2022 return and have a 2022 Form 8606 with the $6,000 basis (assuming your traditional IRA was empty before the contribution). This basis will be entered in the follow-up questions (steps 11 and 12) when you enter your Form 1099-R for the conversion.

 

To enter the 1099-R conversion on your 2023 tax return: 

  1. Click "Federal Taxes" on the top and select "Wages & Income"
  2. Click "I'll choose what to work on"
  3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)
  4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
  5. Click "I'll Type it Myself"
  6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
  7. Click "Continue" and enter the information from your 1099-R
  8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account
  9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
  10. On the "Your 1099-R Entries" screen click "continue"
  11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
  12. Answer the questions about the basis from line 14 of your 2022 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

 

 

On your 2022 tax return you should have entered the nondeductible traditional IRA contribution:

 

  1. Open your return
  2. Click “Deductions &Credits” on the top
  3. Click "I'll choose what to work on"
  4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start
  5. Select “traditional IRA
  6. Answer “No” to “Is This a Repayment of a Retirement Distribution?
  7. Enter the amount you contributed
  8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
  9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
  10. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
  11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

 

Please see How do I amend my federal tax return for a prior year? for additional information.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

1 Reply
DanaB27
Employee Tax Expert

Traditional IRA to Roth Conversion - Form 5498 from 2022 tax year and 1099-R is from 2023 tax year....what should I do to avoid turbo tax think my 1099-R distribution is income?

You stated that you made the $6,000 contribution for 2022 in 2023, therefore, you should have entered the nondeductible traditional IRA contribution on your 2022 return and have a 2022 Form 8606 with the $6,000 basis (assuming your traditional IRA was empty before the contribution). This basis will be entered in the follow-up questions (steps 11 and 12) when you enter your Form 1099-R for the conversion.

 

To enter the 1099-R conversion on your 2023 tax return: 

  1. Click "Federal Taxes" on the top and select "Wages & Income"
  2. Click "I'll choose what to work on"
  3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)
  4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
  5. Click "I'll Type it Myself"
  6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
  7. Click "Continue" and enter the information from your 1099-R
  8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account
  9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
  10. On the "Your 1099-R Entries" screen click "continue"
  11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
  12. Answer the questions about the basis from line 14 of your 2022 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

 

 

On your 2022 tax return you should have entered the nondeductible traditional IRA contribution:

 

  1. Open your return
  2. Click “Deductions &Credits” on the top
  3. Click "I'll choose what to work on"
  4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start
  5. Select “traditional IRA
  6. Answer “No” to “Is This a Repayment of a Retirement Distribution?
  7. Enter the amount you contributed
  8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
  9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
  10. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
  11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

 

Please see How do I amend my federal tax return for a prior year? for additional information.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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