1099-R Code 7 which was all converted to Roth. 1099-R code 7 normal distribution was 20,000. tax payer then deposited this into his roth
Agi on return under 125,000…..
Dumb ? but conflicted on how i present the Roth side of this on tax return.
Help
Usually, this would be done as a partial conversion of the 20,000 with 20,000 on 4a and 4b assuming no IRA basis, and Form 8606 would show a 14,000 conversion. The converted amount is part of the 20,000 on 4b.
However, if the Roth contributions were coded as regular Roth contributions by the custodian instead of a conversion, then there would be no 8606. If this was done prior to 7/15/2020, client might have made a 7000 Roth contribution for 2020 and 7000 for 2019. Suggest checking the Roth statement to determine how the custodian recorded the contribution, which will also be reported to the IRS on Forms 5498 for 2019 and 2020. SInce 7000 is the regular contribution limit for both those years, there might have been confusion. In addition, if client made separate regular contributions, there would be an excess regular contribution issue caused by exceeding the limit, or possibly the Roth regular contribution lncome limit if single.
Either way the taxable income will be the same, but only a conversion triggers the 8606. So this all boils down to how the custodian coded the 14,000 of Roth contributions, regular or conversion.
Permalink Submitted by Alan - IRA critic on Wed, 2021-03-24 15:32
A 60 day rollover conversion can be done without income limits. A conversion is reported on Form 8606, and the amount of 20,000 will also show on line 4a and 4b of Form 1040 (if no IRA basis).
Permalink Submitted by David Castelli on Sun, 2021-04-04 11:49
Thank you Alan. Sorry for delay in responding, been that kind of tax season. You are the best, and more facts came inThis started with the client taking 20,000 out of traditional IRA( I have a 1099-R. code 7 for 20,000Then client put 14,000 into a Roth IRA the next day…….So looks like 20,000 normal distribution and 6,000 to Form 8606 amd to 4a & 4b of 1040 and 26,000 of income .You agree?