Taxes 101 Roth IRA Conversions (Converting IRA to Roth IRA) Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by TurboTax Blog Team Published Jun 13, 2024 4 min read Reviewed by Jotika Teli, CPA Lena Hanna, CPA Understanding the difference between Roth and Traditional IRAs can be confusing, but it is critical for retirement planning. In this article, we will discuss the difference between both types of IRAs and which may be best suited for you. We will also consider the process of converting a Traditional IRA to a Roth IRA and why this financial strategy may make sense for you. A Traditional IRA allows you to reduce your taxable income when you make a deposit to your IRA by the original due date of your tax return. The amount you deposit in your IRA account is then treated as a reduction to your total income on your tax return. For those in the 25% tax bracket, this means that a deposit of $5,000 is only $3,750 out of pocket since you are getting a tax benefit. If you have a 401(k) or similar retirement plan at work, your ability to deduct you IRA deposit may be limited depending on your income. This phase-out begins at $77,000 for singles and $123,000 for taxpayers that are married filing jointly. On the withdrawal side, you may not withdraw funds prior to 591/2 (with limited exceptions). Beginning in the year 2023, you are required to start taking required minimum distributions (RMDs) at age 73. The withdrawals are taxed as regular income and subject to whatever marginal rate you’re in when you withdraw the money. The benefit of this is that many people expect to be in a lower tax bracket upon retiring than when they were working. Since you received an adjustment lowering your total income when you made the contribution, you will report any distributions from a traditional IRA as taxable income. Now, let’s look at the Roth IRA. In a sense, it’s the opposite of the Traditional IRA. You do not receive a tax deduction for deposits. However, the money can grow tax-free. Once you have held the Roth IRA for 5 years and reach 59 ½ years old, the money you deposit can be withdrawn at any time without penalty, and any growth within the account is not taxable. There are no required distributions at any age. The Roth IRA has its own income limits if you are covered by a plan at work; the phase-out begins at $146,000 for single taxpayers and $230,000 for married filing jointly. Finally, you have the option to convert money from your Traditional IRA to your Roth IRA. In order to do this, you would be required to pay the tax on the converted amount. However, once that moneyis part of the Roth IRA, it would not be subject to tax again. Any conversions from a traditional IRA to a Roth IRA must be done within 60 days to be considered a conversion contribution. The current law also permits a conversion from your 401(k) directly to a Roth account. Now that you know the basics, how do you decide which one is right for you and whether or not a conversion from your Traditional IRA or 401(k) to a Roth IRA is the right move? First, you must know your marginal tax rate which is the tax paid as a percent of the very next dollar of taxable income. Unless you are near retirement or already there, your marginal rate at retirement is a bit of a long term forecast. Keep in mind, however, in today’s dollars, a single retiree over the age of 65 can have $63,550 in gross income (with the standard deduction totaling $16,550 this is $47,000 taxable) to be at the top of the 12% bracket. As a first step, it’s not a bad idea for someone in the 10% or 12% bracket to choose Roth knowing that as their income increases, they may wish to move to the pre tax 401(k) or IRA to avoid taxation at a higher tax rate. An older wage earner may find that their pension will provide a higher replacement income, and when combined with their own retirement account withdrawals, they will be in a higher tax bracket at retirement. Using Roth IRAs and starting to convert their pre-tax accounts can be a good idea to help keep your overall tax rate in check. If you decide to convert, remember, it’s wise to do this only if you can pay the tax, when due, from other funds, and not from the IRA money. As with any financial issue, your specific situation will differ from those of others, so it is important to understand the tax consequences of any decision you make. No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed. Get started Previous Post Estate Planning 101: A Step-By-Step Guide Next Post 10 Commonly Overlooked Tax Deductions and Credits Written by Adam Middleton More from Adam Middleton 36 responses to “Roth IRA Conversions (Converting IRA to Roth IRA)” Where on Turbo Tax do I report a Roth Conversion? Reply On the 2014 tax return TurboTax is adding the traditional IRA conversion amount to the contribution amount on the Roth IRA calculation. It then says that the Roth contribution exceeded the limit and a penalty is due. I do not think this is correct but cannot determine where I went wrong.help appreciated Reply Turbo tax is counting my Roth conversion amount as “excludable” from my Hawaii state tax. Is that correct? (Converting from Traditional to Roth in 2010, paying in 2011 and 2012) Reply Does Turbo Tax software contain the form and instructions for taking the minimum required distribution from an IRA after age 70-1/2? I understand this is IRS form 8606. Am I correct? Reply Hi Chuck, Yes TurboTax handles form 8606 and your distributions would be included on your form 1099-R Thank you, Lisa Greene-Lewis Reply Hi Lesa, Does Turbo Tax Deluxe 2014 take care of IRA and IRA Roth withdrawals? Denise Having the same issues as most of these posts! Bummed that there isn’t a fix for this issue – have to file an extension & do taxes the “old-fashioned” way. I guess the goods news is we all know enough check and challenge the SW. I’m thinking TT lost my future business too! Reply The problem with the 2010 Trad to Roth conversion certainly gave me a lot of headache/hassle. I believe the ‘bug’ we are experiencing in TT is leftover data if you mistakenly check the Roth IRA contribution but then do not delete the form! I know I made a mistake the first time I was doing the program, but after doing some internet searching, I believed the problem is solved by going to FORMS mode and DELETING (I think TT calls it removing) the IRA Worksheet Form. When I re-did it after that, TT correctly showed me I have exceeded my income cap for traditional IRA contribution and cannot deduct it. I have the conversion correctly entered under the 1099-R section. Reply An update: Although I had looked at IRS Publication 590 previously when researching this issue, I just revisited that document and found some examples that I didn’t see on the first reading. It appears that TurboTax is handling the issue in accordance with IRS Publication 590’s example. The example I am referring to is on pages 40 & 41 and involves “Rose Green”. Unfortunately when I researched this in late 2009, I didn’t find any indication that multiple Traditional IRA’s would be treated as a single entity for the purpose of determining the basis for a conversion. Scott Reply I just got off the phone with TurboTax support. What an outstanding experience – Hat’s off to Julie! That’s the good news – the bad news is TurboTax, at this time, isn’t able to handle my situation. Here’s my scenario: I have been working for over 30 years. I have always been a part of a Employer Provided Retirement Plan. I have been making yearly (non-deductable) contributions to Tradtional IRA’s for my entire working life. I am unable to make a contribution to a Roth IRA because I make too much money. In 2010 I opened a completely new Traditional IRA account and contributed $6000.00 to this account. Again, as in the past, this is a non-deductable contribution. About a week later I converted the money in that account to a Roth IRA account. The amount of money converted was $6000.05. Based upon my understanding of the law, I believe that the above should be treated as a zero-gain (OK – 5 cent gain) Traditional IRA to Roth IRA conversion. The above is the scenario: Here’s what TurboTax-Customer-Support-Julie & I determined. TurboTax takes ALL of my Traditional IRA accounts and lumps them together. It then takes the basis of ALL these accounts and calculates a taxable event based on that historical basis. The way TurboTax handles this situation, this is a taxable event because the gain isn’t 5 cents but is proportionally based on the gains received over 30 years of having Tradtional IRA’s. As far as TurboTax-Customer-Service-Julie and I can tell, TurboTax is unable to break out my “2010 Only” IRA account’s basis seperately and treat this Roth conversion as a zero-gain event. I researched my “individual 2010 contribution” Traditional IRA account to Roth IRA conversion strategy at some length before executing this tactic. I am pretty confident that what I did should be a Zero-Gain Tax Event. If I am correct, when will TurboTax offer a path to calculate this sort of event as a Zero-Gain Tax Event? Reply So TurboTax Deluxe does not add income from Roth IRA conversion from Regular IRA anywhere on Form 1040. I did a complete conversion of a whole account and checked that box in TurboTax(R). Also have a 2 in box 7 of 1099R. Taxes due in 2 weeks, when will this BUG be fixed?????? Reply I ran into the same problem. I converted a traditional ira to a Roth, but TT keeps saying I have exceeded the income limits. I tried switching to HR Block online and it has the same problem! Has anyone tried any other tax prep websites that correctly account for Roth conversions? Reply All, I think in TT the question if you recharcterized may be the problem. My interpretation is recharacterization and conversion are two different things. I was also getting told I would pay a penalty until I said nothing was being recharacterized. Reply TT is not handling the non-deductible traditional IRA to Roth IRA conversion correctly. No matter what we do, it seems to consider the non-deductible contributions as taxable. Bob Meighan, when can we expect a TT update to fix the bug? Reply Simon S: With the 2010 Roth IRA conversion the 50% split means split between *tax years* 2010 and 2011. Nothing is due on the year 2010 form I believe. Read IRS pub 590 for the definitive information. Reply TurboTax Deluxe definitely has a bug in not transferring the correct taxable amount as income to line 15(b) of Form 1040. ATTN: Bob Meighan, VP TurboTax, who wrote on Mar 7, please help I downloaded a 1099-R on Roth IRA conversion into TurboTax. After doing the TurboTax interview for the 1099-R, I opened Form 8606-S which shows that the correct taxable amount is actually calculated there. The default case is to split the taxable amount into two, 50% for 2001 and 50% for 2002. But this amount does not get transferred to line 15(b) in Form 1040, which shows zero. However, if I checked the box to pay the entire taxable amount calculated in Form 8606-S, the entire taxable amount does get transferred to line 15(b) in Form 1040. Clearly, TurboTax Deluxe has a software bug and cannot deal with the default case of paying 50% in 2001 and 50% in 2002. Since I cannot type the 50% amount into line 15(b) of Form 1040, I don’t know what to do other than filling out my return by hand:( Reply I’ve tried the fix you’ve mentioned, and a number of others posted on turbo tax. Unfortunately, no matter what I do, I can’t get the conversion to be handled properly. I have used TT for 8 years, and now I have to take my taxes to a professional becuase TT can’t handle this situation. Reply I converted some of my TIAA tax deferred account into a Roth last year and wanted to pay the tax in 2010 so that the roth would be all after-tax dollars. My TIAA agent advised me to have the fed and state tax withheld and then she put the balance into a new Roth. I received two 1099R forms from TIAA – one with the gross distr = taxable distrib = total tax withheld (so 100% was tax). This was marked 7 for normal distribution. the second 1099R had for the Gross=Taxable the amount that went into the Roth. It was marked G for Rollover. When I entered this into Turbo, the program treated the part marked G as Rollover and gave me a big tax refund. But this means that I will have to pay tax when I redeem the Roth. I have tried unsuccessfully to override this Rollover. In the interview questions after I enter the 1099R info, I checked all sorts of different combinations but still get the big (and incorrect) tax refund. Suggestions?? Reply Oh. So. Close. I was excited to find this thread… As Mr. Meighan suggested, I was checking the Roth contribution box. For context… I have several years of non-deductible tIRA contributions that I rolled over in 2010, plus I still plan to make my tIRA contribution for 2010 and directly roll it over. The pre-2010 conversions seemed to work just fine in TT, but when I put in my 2010 1099-R in income and my tIRA contributions on deductions it’s acting like I owe additional taxes on the $5K. On the IRA Info Wks form line 35 — Conversion Contributions Taxable at conversion — has the $5K there. Any thoughts on how I might fix it? Reply i also have the same problem as qqq. i converted a traditional irt to roth. and the tt deluxe didn’t think that’s taxable. the program didn’t ask me if i want to pay tax now or split it into 2 years. very frustrating. tech support told me to buy tt premier. but based on what qqq wrote, premier version doesn’t fix this problem either. i guess i will have to do it by hand then. Reply i also have the same problem as QQQ. Reply Bob Meighan, Myself and a few others I have spoke to are loyal Turbo Tax users and find ourselves in the same boat as many of the previous posters (Alan Rouse). Having issues with 401K/IRA rollovers, conversions into Roth IRA etc. Have not attempted your tip yet, but look forward to trying later today. I’m sure a video would help many users and reduce a large number a support calls I am sure you are experiencing. Now if you could only help get rid of that pesky AMT 😉 Reply After reading some earlier posts, I believe the error many MAY be making is indicating that you are making a Roth contribution. DO NOT check the box in the IRA Deduction section indicating you have made a ROTH contribution. This will cause the problems many are having. What I often have customers do is delete these forms from the return (in Forms mode) since they have erroneous info: 1. The IRA contribution worksheet 2. The IRA Info worksheet 3. Form 1099-R for the conversion Then i go through the process again. Bob Meighan VP, TurboTax Reply Alan Rouse… To achieve the result you want, follow these steps: 1. Enter the IRA distribution first from the conversion of the IRA contribution to Roth. This is done in the income section under Retirement/Pensions. 2. The Form 1099-R should show an amount in boxes 1 and 2a. The box for Not Determined is probably checked. Enter everything just as it appears on your Form 1099-R. 3. The distribution code should be 2 (although it could be different). 4. There will be a question about the basis in your IRA for 2009. Make sure you enter this. 5. When done here, you’ll then eventually enter the (nondeductible) IRA contribution in the Deduction section. Based on your income, it will determine that it is not deductible. TurboTax will also determine you have basis in this contribution equal to your contribution since it was not deductible. 6. Caution– Make sure you do NOT indicate you made a Roth contribution. This is the mistake I see many people make. In the end, the IRA contribution will be nondeductible, but you’ll be able to convert the funds into a Roth just as you intended. Net result, no tax on the conversion. If I get time, will put a short video together showing this since it is a common question. Bob Meighan VP, TurboTax Reply I converted a traditional IRA to a ROTH in 2014. I have a basis in the traditional of $8k (out of a total amount of $29k minus income taxes withheld). Which version of TurboTax (deluxe or premium) should I purchase for preparing my 2014 tax return? Reply Even if you and your wife are well above the IRS $179,000 limit for a Roth contribution and don’t qualify taking even a partial deduction for a traditional IRA contribution, you can still put $5,000 ($6,000 if you’re old enough) each intyo Roth IRAs, assuming you’re not yet 70.5 years old by contributing to a nondeductible IRA then converting the nondeductible IRA to a Roth. However, I’m not having any luck getting the Turbo-Tax software to cooperate in recording these transactions onto our tax return. Would welcome hearing from anyone with a solution for this. Reply It’s just not working at all to get the correct taxable amount for a trad to roth conversion. Useless, I guess I can no longer use TT for taxes, they blew this one. Reply My wife and I each contributed $5000 to non-deductible traditonal IRA in 2010, and we converted it to Roth IRA in late 2010. In Turbotax, it says that our AGI is too high to convert the $5000 to roth IRA in 2010, and we have to pay penalty for the $5000 in the roth IRA despite that its after-tax money (we have no pre-tax contribution). Turbotax suggests us to convert it back to traditional IRA to avoid that tax. Does this make sense? Should we convert it back to traditional IRA? How can we correct it in Turbotax? Reply Reading the article, I just realized if you did your conversion in 2010, you will be tax only in 2011 and 2012. This is why I did not see the tax increase and I thought that was TurboTax bug. Duh! Reply I’m struggling with the Roth conversion as well, only with a different issue. 2010 taxes don’t go up with the Roth conversion because the default setting is to take advantage of the rule that 1/2 your income converts in 2011 and 1/2 in 2012. My issue is that when I plug in the remaining value of my traditional IRA, my tax liability keeps increasing. Makes no sense. If I don’t report to the government what is left I pay less taxes than if I tell them? Hopefully Intuit will work out these conversion bugs in a update release soon. Reply Remember! The “cost basis” for a converted IRA is the entire amount. If you have $200,000-$300,000 in your IRA you MUST pay tax on the entire amt – either in one lump or over two years. For us it’s a no-brainer since we’re in our 50’s & expect taxes to skyrocket. Reply I too spent over an hour on the chat line with a intuit rep that was clueless to my questions on the Traditional to Roth conversion. I have Turbo Deluxe and the Federal piece is working the way it is suppose too. For 2010 only, any Roth conversion taxes can be deferred until 2011 & 2012 so it would NOT change 2010 tax implications, it will get carried over to the 2011 form and then 2012. My problem however is that the State turbotax is bringing the entire thing over to 2010 and calculating the entire tax in 2010 which will totally mess up 2011 & 2012. The solution from the chat person was to override this and delete it from State. I believe this is then going to give me problems with e-filing because I have something overridden. Hopefully they will fix the State program in a future release. Hope this helps you out. Reply I have been struggling trying to enter my conversion of money from a traditional IRA to a Roth IRA. I can see that turbo tax premier is not handling it correctly because my tax due does not change when the amount is entered. I have wasted 4 hours (really) with well-meaning but clueless intuit employees on their chat line, full of irrelevant suggestions and wild guesses about what to do. However, I refuse to pay $30 per hour to talk to some so-called tax expert because this program is so unintuitive in how something like this can not only be entered, but even found in the comment section. Presumably the financial benefits will be worth the aggravation of dealing with intuit – in the long run! Reply Do you have any information on Roth Conversions? Must they be made by 12/31/yyyy, or April 15 of the following year? Thanks. Reply Is there a calculator for converting traditional ira to a roth ira considering the one time allowance this year? age 74, no earnings, etc. all income is savings & pensions. Reply […] time, another look at the Roth IRA in a post titled Taxes 101: IRA Conversions. In this post, I discuss the difference between the Traditional IRA, the Roth IRA, and the process […] Reply Leave a ReplyCancel reply Browse Related Articles Taxes 101 2010 Roth IRA Conversions: Have You Considered All the … Tax Tips Remember IRA Contributions Tax Tips Should You Contribute to a Roth IRA, Traditional IRA or… 401K, IRA, Stocks The Tax Benefits of Contributing to an IRA Self-Employed Self-Employed? Here’s What You Need to Know About SEP… 401K, IRA, Stocks Can I Make Spousal IRA Contributions for Retirement? Taxes 101 The Basics of Individual Retirement Accounts and Your T… 401K, IRA, Stocks Tax-Wise Retirement Planning Retirement Roth IRA Withdrawal Rules & Penalties Tax Tips The Basics of a Traditional IRA
On the 2014 tax return TurboTax is adding the traditional IRA conversion amount to the contribution amount on the Roth IRA calculation. It then says that the Roth contribution exceeded the limit and a penalty is due. I do not think this is correct but cannot determine where I went wrong.help appreciated Reply
Turbo tax is counting my Roth conversion amount as “excludable” from my Hawaii state tax. Is that correct? (Converting from Traditional to Roth in 2010, paying in 2011 and 2012) Reply
Does Turbo Tax software contain the form and instructions for taking the minimum required distribution from an IRA after age 70-1/2? I understand this is IRS form 8606. Am I correct? Reply
Hi Chuck, Yes TurboTax handles form 8606 and your distributions would be included on your form 1099-R Thank you, Lisa Greene-Lewis Reply
Having the same issues as most of these posts! Bummed that there isn’t a fix for this issue – have to file an extension & do taxes the “old-fashioned” way. I guess the goods news is we all know enough check and challenge the SW. I’m thinking TT lost my future business too! Reply
The problem with the 2010 Trad to Roth conversion certainly gave me a lot of headache/hassle. I believe the ‘bug’ we are experiencing in TT is leftover data if you mistakenly check the Roth IRA contribution but then do not delete the form! I know I made a mistake the first time I was doing the program, but after doing some internet searching, I believed the problem is solved by going to FORMS mode and DELETING (I think TT calls it removing) the IRA Worksheet Form. When I re-did it after that, TT correctly showed me I have exceeded my income cap for traditional IRA contribution and cannot deduct it. I have the conversion correctly entered under the 1099-R section. Reply
An update: Although I had looked at IRS Publication 590 previously when researching this issue, I just revisited that document and found some examples that I didn’t see on the first reading. It appears that TurboTax is handling the issue in accordance with IRS Publication 590’s example. The example I am referring to is on pages 40 & 41 and involves “Rose Green”. Unfortunately when I researched this in late 2009, I didn’t find any indication that multiple Traditional IRA’s would be treated as a single entity for the purpose of determining the basis for a conversion. Scott Reply
I just got off the phone with TurboTax support. What an outstanding experience – Hat’s off to Julie! That’s the good news – the bad news is TurboTax, at this time, isn’t able to handle my situation. Here’s my scenario: I have been working for over 30 years. I have always been a part of a Employer Provided Retirement Plan. I have been making yearly (non-deductable) contributions to Tradtional IRA’s for my entire working life. I am unable to make a contribution to a Roth IRA because I make too much money. In 2010 I opened a completely new Traditional IRA account and contributed $6000.00 to this account. Again, as in the past, this is a non-deductable contribution. About a week later I converted the money in that account to a Roth IRA account. The amount of money converted was $6000.05. Based upon my understanding of the law, I believe that the above should be treated as a zero-gain (OK – 5 cent gain) Traditional IRA to Roth IRA conversion. The above is the scenario: Here’s what TurboTax-Customer-Support-Julie & I determined. TurboTax takes ALL of my Traditional IRA accounts and lumps them together. It then takes the basis of ALL these accounts and calculates a taxable event based on that historical basis. The way TurboTax handles this situation, this is a taxable event because the gain isn’t 5 cents but is proportionally based on the gains received over 30 years of having Tradtional IRA’s. As far as TurboTax-Customer-Service-Julie and I can tell, TurboTax is unable to break out my “2010 Only” IRA account’s basis seperately and treat this Roth conversion as a zero-gain event. I researched my “individual 2010 contribution” Traditional IRA account to Roth IRA conversion strategy at some length before executing this tactic. I am pretty confident that what I did should be a Zero-Gain Tax Event. If I am correct, when will TurboTax offer a path to calculate this sort of event as a Zero-Gain Tax Event? Reply
So TurboTax Deluxe does not add income from Roth IRA conversion from Regular IRA anywhere on Form 1040. I did a complete conversion of a whole account and checked that box in TurboTax(R). Also have a 2 in box 7 of 1099R. Taxes due in 2 weeks, when will this BUG be fixed?????? Reply
I ran into the same problem. I converted a traditional ira to a Roth, but TT keeps saying I have exceeded the income limits. I tried switching to HR Block online and it has the same problem! Has anyone tried any other tax prep websites that correctly account for Roth conversions? Reply
All, I think in TT the question if you recharcterized may be the problem. My interpretation is recharacterization and conversion are two different things. I was also getting told I would pay a penalty until I said nothing was being recharacterized. Reply
TT is not handling the non-deductible traditional IRA to Roth IRA conversion correctly. No matter what we do, it seems to consider the non-deductible contributions as taxable. Bob Meighan, when can we expect a TT update to fix the bug? Reply
Simon S: With the 2010 Roth IRA conversion the 50% split means split between *tax years* 2010 and 2011. Nothing is due on the year 2010 form I believe. Read IRS pub 590 for the definitive information. Reply
TurboTax Deluxe definitely has a bug in not transferring the correct taxable amount as income to line 15(b) of Form 1040. ATTN: Bob Meighan, VP TurboTax, who wrote on Mar 7, please help I downloaded a 1099-R on Roth IRA conversion into TurboTax. After doing the TurboTax interview for the 1099-R, I opened Form 8606-S which shows that the correct taxable amount is actually calculated there. The default case is to split the taxable amount into two, 50% for 2001 and 50% for 2002. But this amount does not get transferred to line 15(b) in Form 1040, which shows zero. However, if I checked the box to pay the entire taxable amount calculated in Form 8606-S, the entire taxable amount does get transferred to line 15(b) in Form 1040. Clearly, TurboTax Deluxe has a software bug and cannot deal with the default case of paying 50% in 2001 and 50% in 2002. Since I cannot type the 50% amount into line 15(b) of Form 1040, I don’t know what to do other than filling out my return by hand:( Reply
I’ve tried the fix you’ve mentioned, and a number of others posted on turbo tax. Unfortunately, no matter what I do, I can’t get the conversion to be handled properly. I have used TT for 8 years, and now I have to take my taxes to a professional becuase TT can’t handle this situation. Reply
I converted some of my TIAA tax deferred account into a Roth last year and wanted to pay the tax in 2010 so that the roth would be all after-tax dollars. My TIAA agent advised me to have the fed and state tax withheld and then she put the balance into a new Roth. I received two 1099R forms from TIAA – one with the gross distr = taxable distrib = total tax withheld (so 100% was tax). This was marked 7 for normal distribution. the second 1099R had for the Gross=Taxable the amount that went into the Roth. It was marked G for Rollover. When I entered this into Turbo, the program treated the part marked G as Rollover and gave me a big tax refund. But this means that I will have to pay tax when I redeem the Roth. I have tried unsuccessfully to override this Rollover. In the interview questions after I enter the 1099R info, I checked all sorts of different combinations but still get the big (and incorrect) tax refund. Suggestions?? Reply
Oh. So. Close. I was excited to find this thread… As Mr. Meighan suggested, I was checking the Roth contribution box. For context… I have several years of non-deductible tIRA contributions that I rolled over in 2010, plus I still plan to make my tIRA contribution for 2010 and directly roll it over. The pre-2010 conversions seemed to work just fine in TT, but when I put in my 2010 1099-R in income and my tIRA contributions on deductions it’s acting like I owe additional taxes on the $5K. On the IRA Info Wks form line 35 — Conversion Contributions Taxable at conversion — has the $5K there. Any thoughts on how I might fix it? Reply
i also have the same problem as qqq. i converted a traditional irt to roth. and the tt deluxe didn’t think that’s taxable. the program didn’t ask me if i want to pay tax now or split it into 2 years. very frustrating. tech support told me to buy tt premier. but based on what qqq wrote, premier version doesn’t fix this problem either. i guess i will have to do it by hand then. Reply
Bob Meighan, Myself and a few others I have spoke to are loyal Turbo Tax users and find ourselves in the same boat as many of the previous posters (Alan Rouse). Having issues with 401K/IRA rollovers, conversions into Roth IRA etc. Have not attempted your tip yet, but look forward to trying later today. I’m sure a video would help many users and reduce a large number a support calls I am sure you are experiencing. Now if you could only help get rid of that pesky AMT 😉 Reply
After reading some earlier posts, I believe the error many MAY be making is indicating that you are making a Roth contribution. DO NOT check the box in the IRA Deduction section indicating you have made a ROTH contribution. This will cause the problems many are having. What I often have customers do is delete these forms from the return (in Forms mode) since they have erroneous info: 1. The IRA contribution worksheet 2. The IRA Info worksheet 3. Form 1099-R for the conversion Then i go through the process again. Bob Meighan VP, TurboTax Reply
Alan Rouse… To achieve the result you want, follow these steps: 1. Enter the IRA distribution first from the conversion of the IRA contribution to Roth. This is done in the income section under Retirement/Pensions. 2. The Form 1099-R should show an amount in boxes 1 and 2a. The box for Not Determined is probably checked. Enter everything just as it appears on your Form 1099-R. 3. The distribution code should be 2 (although it could be different). 4. There will be a question about the basis in your IRA for 2009. Make sure you enter this. 5. When done here, you’ll then eventually enter the (nondeductible) IRA contribution in the Deduction section. Based on your income, it will determine that it is not deductible. TurboTax will also determine you have basis in this contribution equal to your contribution since it was not deductible. 6. Caution– Make sure you do NOT indicate you made a Roth contribution. This is the mistake I see many people make. In the end, the IRA contribution will be nondeductible, but you’ll be able to convert the funds into a Roth just as you intended. Net result, no tax on the conversion. If I get time, will put a short video together showing this since it is a common question. Bob Meighan VP, TurboTax Reply
I converted a traditional IRA to a ROTH in 2014. I have a basis in the traditional of $8k (out of a total amount of $29k minus income taxes withheld). Which version of TurboTax (deluxe or premium) should I purchase for preparing my 2014 tax return? Reply
Even if you and your wife are well above the IRS $179,000 limit for a Roth contribution and don’t qualify taking even a partial deduction for a traditional IRA contribution, you can still put $5,000 ($6,000 if you’re old enough) each intyo Roth IRAs, assuming you’re not yet 70.5 years old by contributing to a nondeductible IRA then converting the nondeductible IRA to a Roth. However, I’m not having any luck getting the Turbo-Tax software to cooperate in recording these transactions onto our tax return. Would welcome hearing from anyone with a solution for this. Reply
It’s just not working at all to get the correct taxable amount for a trad to roth conversion. Useless, I guess I can no longer use TT for taxes, they blew this one. Reply
My wife and I each contributed $5000 to non-deductible traditonal IRA in 2010, and we converted it to Roth IRA in late 2010. In Turbotax, it says that our AGI is too high to convert the $5000 to roth IRA in 2010, and we have to pay penalty for the $5000 in the roth IRA despite that its after-tax money (we have no pre-tax contribution). Turbotax suggests us to convert it back to traditional IRA to avoid that tax. Does this make sense? Should we convert it back to traditional IRA? How can we correct it in Turbotax? Reply
Reading the article, I just realized if you did your conversion in 2010, you will be tax only in 2011 and 2012. This is why I did not see the tax increase and I thought that was TurboTax bug. Duh! Reply
I’m struggling with the Roth conversion as well, only with a different issue. 2010 taxes don’t go up with the Roth conversion because the default setting is to take advantage of the rule that 1/2 your income converts in 2011 and 1/2 in 2012. My issue is that when I plug in the remaining value of my traditional IRA, my tax liability keeps increasing. Makes no sense. If I don’t report to the government what is left I pay less taxes than if I tell them? Hopefully Intuit will work out these conversion bugs in a update release soon. Reply
Remember! The “cost basis” for a converted IRA is the entire amount. If you have $200,000-$300,000 in your IRA you MUST pay tax on the entire amt – either in one lump or over two years. For us it’s a no-brainer since we’re in our 50’s & expect taxes to skyrocket. Reply
I too spent over an hour on the chat line with a intuit rep that was clueless to my questions on the Traditional to Roth conversion. I have Turbo Deluxe and the Federal piece is working the way it is suppose too. For 2010 only, any Roth conversion taxes can be deferred until 2011 & 2012 so it would NOT change 2010 tax implications, it will get carried over to the 2011 form and then 2012. My problem however is that the State turbotax is bringing the entire thing over to 2010 and calculating the entire tax in 2010 which will totally mess up 2011 & 2012. The solution from the chat person was to override this and delete it from State. I believe this is then going to give me problems with e-filing because I have something overridden. Hopefully they will fix the State program in a future release. Hope this helps you out. Reply
I have been struggling trying to enter my conversion of money from a traditional IRA to a Roth IRA. I can see that turbo tax premier is not handling it correctly because my tax due does not change when the amount is entered. I have wasted 4 hours (really) with well-meaning but clueless intuit employees on their chat line, full of irrelevant suggestions and wild guesses about what to do. However, I refuse to pay $30 per hour to talk to some so-called tax expert because this program is so unintuitive in how something like this can not only be entered, but even found in the comment section. Presumably the financial benefits will be worth the aggravation of dealing with intuit – in the long run! Reply
Do you have any information on Roth Conversions? Must they be made by 12/31/yyyy, or April 15 of the following year? Thanks. Reply
Is there a calculator for converting traditional ira to a roth ira considering the one time allowance this year? age 74, no earnings, etc. all income is savings & pensions. Reply
[…] time, another look at the Roth IRA in a post titled Taxes 101: IRA Conversions. In this post, I discuss the difference between the Traditional IRA, the Roth IRA, and the process […] Reply