Traditional Individual Retirement Agreements (IRAs) made with pre-tax dollars can be converted to a Roth IRA, however these conversions are taxable transfers.
Where do I enter this in the system?
To report a conversion properly, you must complete two steps:
Step One
The taxpayer will be issued Form 1099-R showing the total distribution made from their Traditional IRA account.
To report, go to:
- Federal Section
- Income
- 1099-R, RRB, SSA
- Add or Edit a 1099-R
- The amount to enter in box 2a depends on your contributions. Click here to see if you are subject to Pro-Rata rules.
Step Two
The full distribution does not need to be converted to a Roth IRA. Conversions must be reported on Form 8606, Part II. Form 1099-R must be entered into the tax program for the program to populate Form 8606.
Form 8606 can be found by going to:
- Federal Section
- Deductions
- Adjustments to Income
- Nondeductible IRAs Form 8606
- Enter the amount being converted as "Net amount converted from traditional, SEP, and SIMPLE IRAs to Roth IRAs"
Please keep in mind that Form 8606 is informational only and will not change the calculation of your return. If you need to adjust the taxable amount from any distribution you will need to manually adjust your 1099-R entry.