1099-R Question For A Roth IRA Rollover Conversion

Sean

I took a traditional 401k account and converted that into a Charles Schwab Rollover IRA, then transferred those funds into a Roth Contributory IRA. So now I have a 1099-R for this transfer. When trying to enter this information into my return the following questions are presented in yes/no fashion:

"Is this a Roth conversion?"

"Did you convert part or all of this distribution from a traditional IRA to a Roth IRA? Or traditional SEP/SIMPLE to a Roth SEP/SIMPLE."

Then the next screen/question is:

"Is this a Rollover?"

"Did you roll over part or all of this distribution into a traditional IRA or another qualified retirement account within 60 days of receiving this distribution?"

My question is which of these am I to answer "yes" (or either). Seems like an argument could be made for both in my case. Does not seem like I can answer both as "yes" as if I answer the first question "yes", the second question is not presented.

Thank you

GeorgeM

Hello Sean, and thank you for your questions.

You are correct in that it appears you are effecting a Roth IRA conversion.  That is, when you moved funds from your Traditional IRA to a Roth IRA, that process of moving money is called a “conversion.”  

We are not sure whether the movement of money from your 401(k) to the Traditional IRA was a rollover in the form of a trustee-to-trustee transfer in which case you would never receive the funds because the trustee would effect the transfer on its own.  

Another type of rollover is when the trustee distributes the retirement funds directly to you, and it is incumbent upon you to timely re-deposit those funds into another qualified retirement account, such as a Traditional IRA.  If that happened here, you would have likely received another 1099-R reflecting the distribution of funds paid directly to you.  However, because it appears that you only have one 1099-R, we will assume that your 1099-R was issued in connection with the conversion of funds from your Traditional IRA to your Roth IRA.  

On the screen, Is this a Roth Conversion, you need to select Yes.  If you select No, the next screen will ask you if this movement of money was a rollover, which it does not appear to be the case.  By selecting Yes to the question “is this a Roth conversion,” you won’t see the screen asking about rollovers.  Instead, you will be asked to enter how much of money that was distributed to you (Box 1 on the 1099-R) was converted to the Roth IRA.  Then enter the amount in the appropriate field.

After you enter the amount that was converted from your Traditional IRA to your Roth IRA, you should see a screen that will ask about prior non-deductible contributions to your Traditional IRA.  Non-deductible contributions are after-tax dollars, and have already been taxed.  If you made any after-tax contributions to your 401(k) before you effected the rollover, you will want to enter these after-tax contributions on this screen.  

When you get to the end of the Retirement Income section, and assuming you have moved far enough through our software, you can preview your Form 1040 by selecting the Summary tab at the top of your screen, and scroll down to View Federal Tax Return.  Click on the View tab, and take a look at line 4a and 4b on the Form 1040.  You should see the IRA distribution amount as well as the taxable amount on those lines.  

If you have other questions, please follow up with those as well.   

Please keep in mind that with any follow-up questions, do not include any personally identifiable information.

Sincerely,

George, EA

Tax Pro