Traditional Individual Retirement Agreements (IRAs) can be converted to a Roth IRA, however these conversions are taxable transfers. In order to report a conversion, the taxpayer will be issued Form 1099-R showing the total distribution made from their Traditional IRA account. The full distribution does not need to be converted to a Roth IRA, however, any amounts not converted are subject to additional taxes and penalties. Conversions must be reported on Form 8606, Part II. Form 1099-R must be entered into the tax program before computing the taxable amount on Form 8606.
To enter an IRA conversion in the tax program click - From the Main Menu of the Tax Return (Form 1040) select:
- Adjustments
- Nondeductible IRAs - Select Taxpayer or Spouse
- Traditional IRAs
- For a conversion only, the only line that needs to be filled in is Net amount of traditional IRAs converted to Roth IRAs.
- Once you've entered the amount that was converted, Exit one menu to the Taxpayer's Form 8606 Menu
- Select Conversions from Traditional to Roth IRAs (Line 1 is pulled forward from Part I of the Form 8606)
Any amount that is considered 'taxable' must be entered on Form 1099-R in the income menu. If the taxable amount is not entered on Form 1099-R, it will not be carried to Form 1040.
NOTE: This is a guide on entering conversions into the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information:
Instructions for Form 8606, Nondeductible IRAs
Publication 590-A, Individual Retirement Arrangements (IRAs)
Tax Topic 451, Individual Retirement Arrangements (IRAs)
