Traditional IRA to Roth IRA Conversion

[rdcoseril]

My inquiry deals with a question TurboTax asks in their software on Traditional IRA to Roth IRA conversions after the information from a 1099-R is entered.  Specifically, TT asks if the money was moved to another retirement account or if something else was done with it.

If I choose “moved the money to another retirement account”, TurboTax sees the Roth IRA conversion as not taxable – which is incorrect.  It appears that I need to choose "did something else with it" in order for TurboTax to see this Roth IRA conversion (correctly) as a taxable event.  However, in reality, moving money from a Traditional IRA to a Roth IRA is a move from one type of retirement account to another.  Two questions:

1.  Do you see what I mean?

2.  Do you agree that the option to choose is "did something else with it"?

Thank you.

[JulieS]

No, I don't agree with that.

I am not sure if you are using TurboTax online, or working from the Desktop (disc or download) version, but in both cases, it comes out right if you answer "moved the money to another retirement account".

In Desktop, when you answer "moved the money to another retirement account", additional questions come up to allow you to report that you converted it to a Roth account. See the image below.

In TurboTax online, the option "I converted some or all of it to a Roth IRA" appear right below the question about whether you moved it to another account. 

[rdcoseril]

Thank you.  I may be wrong, but I think that an update might have put into the effect the additional verbiage for a Roth conversion that you've described.

[tomdeeii]

Logically (though the government doesn't always see things this way), you're still in an IRA, just with different withdrawal requirement dates. If you withdrew and amount out either IRA as cash then it would be taxable. The purpose of choosing either a Traditional or ROTH IRA is for when you anticipate the time you will start to withdraw funds. If you intend to work late into your sixties you would select a ROTH starting withdrawals at 70 1/2 when your income is anticipated to be lower. Traditional would allow withdrawal a 59 1/2 when you might decide to work less therefore lowering your income. The whole idea in to pay minimum tax on retirement funds.