A taxpayer who converted a traditional IRA to a Roth IRA will be issued Form 1099-R showing the total distribution from the traditional IRA. A Roth IRA conversion must be reported on Form 8606.
Form 8606 has three parts:
- Part I is used to calculate the nondeductible contributions to traditional IRAs and calculate the taxable amount of distributions from traditional, SEP, and SIMPLE IRAs.
- Part II is used to calculate the taxable income resulting from a conversion of a traditional, SEP, or SIMPLE IRA to a Roth IRA.
- Part III is used to calculate the taxable amount of a Roth IRA distribution.
The Roth IRA conversion is reported in Part II, but note that the taxable amount of the distribution calculated there will NOT carry to Form 1040. Enter the taxable amount in Box 2a of Form 1099-R.
The first step to entering an IRA conversion in TaxSlayer Pro is entering the Form 1099-R the taxpayer received related to the distribution. If the entire distribution was converted to a Roth IRA, leave box 2a blank, otherwise if only part of the distribution was converted to a Roth IRA enter in box 2a the amount not converted.
Then, from the Main Menu of the tax return (Form 1040) select:
- Nondeductible IRAs - If filing MFJ select Taxpayer or Spouse.
- Traditional IRAs
- Net amount of traditional IRAs converted to Roth IRAs - Enter the amount converted.
Note: This is a guide on entering IRA to Roth IRA conversions into the TaxSlayer Pro program. This is not intended as tax advice.