What tax form do I use for Roth conversion?

Asked by: Santa Graham  |  Last update: February 9, 2022
Score: 4.3/5 (46 votes)

Form 5498 reports IRA contributions, rollovers, Roth IRA conversions, and required minimum distributions (RMDs) to the IRS. Your IRA trustee or custodian is the one responsible for mailing Form 5498 to the IRS, along with a copy to you.

What does a 1099-R look like for a Roth conversion?

For a Roth conversion, the 1099-R usually has a Distribution Code 2 in Box 7. That means it is an early distribution but an exception applies so there is no penalty. ... The Box 1 amount from your 1099-R should appear on Line 15a of your 1040, but Line 15b should be zero.

Do I need to file 8606 for Roth conversion?

Conversions from traditional, SEP, or SIMPLE IRAs must also be reported on Form 8606. Additionally, you must file the form every year you receive a distribution from your Roth IRA or your traditional IRA if you ever previously contributed after-tax amounts.

Why did I get a 1099-R for a Roth conversion?

Q: WHY DID I RECEIVE A FORM 1099-R? A: Form 1099-R reports distributions taken from your IRA, Roth IRA, SEP, SIMPLE, or 403(b) account during 2020. This includes IRA distributions that were taken as a rollover. Trustee-to-trustee transfers are not considered distributions and therefore are not reportable to the IRS.

How do I report a backdoor Roth conversion?

The taxpayer should have received a Form 1099-R for the distribution that was converted to a Roth IRA. To report a backdoor Roth IRA conversion, from the Main Menu of the tax return (Form 1040) select: Adjustments. Nondeductible IRAs - If filing MFJ, select Taxpayer or Spouse.

The Optimal Way to Pay Taxes on Your Roth Conversion

26 related questions found

How do I report a Roth conversion on TurboTax?

To report the Traditional IRA distribution and the conversion contribution:
  1. log in to your Turbo Tax account.
  2. click on "take me to my return"
  3. click on the "federal taxes" tab.
  4. click on "wages and income"
  5. choose "show more and "see list of all income"
  6. scroll down to "retirement plans and social security"

How do I report a backdoor Roth in TurboTax 2020?

Go to Federal Taxes -> Wages & Income -> IRA, 401(k), Pension Plan Withdrawals (1099-R). As you work through the interview, you will eventually come to the point to enter the 1099-R. Select Yes, you have this type of income. Import the 1099-R if you'd like.

How are Roth IRA conversions taxed?

Taxes Due: When you convert to a Roth IRA, the converted IRA balance is treated as if it were a distribution to you. This "income" must be included on your tax return in the year of conversion. You would not owe taxes on the after-tax contributions you have made to your existing IRA.

Do Roth conversions count as income?

The amount you convert from a traditional IRA to a Roth IRA is treated as income—just like all taxable distributions from pretax qualified accounts. Therefore the conversion amount is part of your MAGI, and it may move you above the surtax thresholds.

How do I convert my IRA to a Roth without paying taxes?

If you want to do a Roth IRA conversion without losing money to income taxes, you should first try to do it by rolling your existing IRA accounts into your employer 401(k) plan, then converting non-deductible IRA contributions going forward.

How do I report a Roth conversion on 1040?

Reporting the Roth Conversion

It will be coded as a rollover to a Roth IRA. You'll use the information from that form to report your Roth conversion income on Form 8606 with the taxable portion of the conversion income reported on your Form 1040.

Does TurboTax have form 8606?

To trigger the 8606 in TurboTax

Inside TurboTax, search for this exact phrase, including the comma: 8606, nondeductible ira contributions. Select the Jump to link in the search results. Proceed through the IRA section, answering questions as you go.

Do you pay taxes on a backdoor Roth conversion?

A Backdoor Roth IRA is not a tax dodge—in fact, it may incur higher tax when it's established—but the investor will get the future tax savings of a Roth account.

Should I do a backdoor Roth conversion?

Backdoor Roth IRAs are worth considering for your retirement savings, especially if you are a high income earner. A Backdoor Roth conversion can be something to consider if: You've already maxed out other retirement savings options. Are willing to leave the money in the Roth for at least five years (ideally longer!)

Why you should not convert to a Roth IRA?

If you're approaching retirement or need your IRA money to live on, it's unwise to convert to a Roth. Because you are paying taxes on your funds, converting to a Roth costs money. It takes a certain number of years before the money you pay upfront is justified by the tax savings.

Does Turbo Tax handle backdoor Roth?

Reporting the Backdoor Roth IRA properly on Turbotax is unfortunately even more complicated than filling out Form 8606 by hand. The key to doing it right is to recognize that you report the conversion step in the Income section but your report the contribution step in the Deductions and Credits section.

Which TurboTax do I need for backdoor Roth?

Reporting a back door Roth is a matter of reporting a non-deductible Traditional IRA contribution and a Form 1099-R for the conversion. Using TurboTax Online, you will need the Deluxe version or higher. Any version of the CD/downloaded TurboTax will have the required forms.

What is the difference between TurboTax Deluxe and TurboTax Premier?

The online Deluxe TurboTax version has some additional features associated with deductions. The online Premier TurboTax version has similar features as that of the Deluxe plus, associated with investments. The Deluxe Plus online TurboTax version includes support for self-employment income such as schedules C and SE.

What is form 8606 T used for?

More In Forms and Instructions

Use Form 8606 to report: Nondeductible contributions you made to traditional IRAs. Distributions from traditional, SEP, or SIMPLE IRAs, if you have ever made nondeductible contributions to traditional IRAs. Conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs.

Can I file form 8606 late?

The penalty for late filing a Form 8606 is $50. There is no time limit for the amended/late filing. However, if a filing omission resulted in an immediate tax consequence (like the full taxation of a Roth conversion), the amendment must be made prior to the three-year limitation on refunds.

What is the deadline for a Roth conversion for 2020?

Yes, the deadline is December 31 of the current year. A conversion of after-tax amounts is not included in gross income.

Can I make a Roth conversion for 2020 in 2021?

On April 5, you could convert your traditional IRA to a Roth IRA. However, the conversion can't be reported on your 2021 taxes. Because IRA conversions are only reported during the calendar year, you should report it in 2022.

Can I do a backdoor Roth for 2020 in 2021?

In 2021, single taxpayers can't save in one if their income exceeds $140,000. ... High-income individuals can skirt the income limits via a “backdoor” contribution. Investors who save in a traditional, pre-tax IRA can convert that money to Roth; they pay tax on the conversion, but shield earnings from future tax.