What IRS Form 1099-R Box 7 Distribution Code do you use for ROTH conversions?

[tenant13]

I was looking at this list: https://thelink.ascensus.com/articles/2020/12/16/irs-form-1099-r-box-7-distribution-codes# and since I'm under 591/2 the code is 2. But what happens after that?

 

[SecondCor521]

Not sure but I'd guess 7.

 

[MarieIG]

https://financeband.com/what-tax-fo...IRA,a 1099-R look like for a Roth conversion?

I found this . . . There should not be a penalty on a conversion.

This is a cut and paste from the attachment.

For a Roth conversion, the 1099-R usually has a Distribution Code 2 in Box 7. That means it is an early distribution but an exception applies so there is no penalty. ... The Box 1 amount from your 1099-R should appear on Line 15a of your 1040, but Line 15b should be zero.

Do I need to file 8606 for Roth conversion?
Conversions from traditional, SEP, or SIMPLE IRAs must also be reported on Form 8606. Additionally, you must file the form every year you receive a distribution from your Roth IRA or your traditional IRA if you ever previously contributed after-tax amounts.

 

[tenant13]

Not sure but I'd guess 7.

7 is Normal Distribution. So that would be the same as if you simply withdrew the money and use it as income. Free to invest in anything you please. But conversion includes redepositing it in ROTH which would then grow tax free. And normally you can only make deposits from earned income.

That list of codes is too complicated.

 

[Midpack]

I was looking at this list: https://thelink.ascensus.com/articles/2020/12/16/irs-form-1099-r-box-7-distribution-codes# and since I'm under 591/2 the code is 2. But what happens after that?

I can't tell what the question is? Sounds like you're under 59-1/2, so when you get your 1099-R it will show Code 2. You enter all the on your Federal return and calculate accordingly per instructions (or your tax planning software, e.g. TurboTax, will do it all for you).

 

[tenant13]

I can't tell what the question is? Sounds like you're under 59-1/2, so when you get your 1099-R it will show Code 2. You enter all the on your Federal return and calculate accordingly per instructions (or your tax planning software, e.g. TurboTax, will do it all for you).

I haven't gotten the form yet and this will be the first time I've done the conversion, so the first time I will see 1099-R. But to asses the amount of taxes I will owe, I'm using TurboTax to enter the data manually. While this year (I've turned 59 in 2022) the code will be 2, I was curious what is it for folks over 59 1/2 and whether it changes anything tax-wise. This will help me to decide how much to convert in 2023 - and given how low the market is right now I kind of want to do it asap

 

[Midpack]

I haven't gotten the form yet and this will be the first time I've done the conversion, so the first time I will see 1099-R. But to asses the amount of taxes I will owe, I'm using TurboTax to enter the data manually. While this year (I've turned 59 in 2022) the code will be 2, I was curious what is it for folks over 59 1/2 and whether it changes anything tax-wise. This will help me to decide how much to convert in 2023 - and given how low the market is right now I kind of want to do it asap

I believe you may have to contend with the 5 year rule, whereas you won't once you've passed 59-1/2. I didn't start Roth conversions until well after 59-1/2 so can't answer directly. I've been code 7 all along. https://www.investmentnews.com/the-...ming no exception to the 10% penalty applies).

 

[tenant13]

I believe you may have to contend with the 5 year rule, whereas you won't once you've passed 59-1/2. I didn't start Roth conversions until well after 59-1/2 so can't answer directly. I've been code 7 all along. https://www.investmentnews.com/the-...ming no exception to the 10% penalty applies).

I've had ROTH for a long time so the 5 year rule doesn't apply to me starting next year: I'll be free to withdraw as I please. But since you're 7 that means I'll eventually be 7 as well - there's no difference in the amount of tax owed.

 

[SecondCor521]

7 is Normal Distribution. So that would be the same as if you simply withdrew the money and use it as income. Free to invest in anything you please. But conversion includes redepositing it in ROTH which would then grow tax free. And normally you can only make deposits from earned income.

That list of codes is too complicated.

Oh, I think I misunderstood your question. I thought you were asking what distribution code would be used for someone who did a Roth conversion after age 59 1/2.

If you're asking what happens with a Roth conversion overall tax wise, you'll receive a 1099-R in January and report it on your taxes with a code 2 in box 7. Your tax software should then have you pay ordinary income taxes on the converted amount but not a 10% penalty. You should also enter the conversion on Part II of Form 8606 (and Part I if you have any basis in your traditional IRA). Finally, you'll receive a 5498 in April or May reflecting the Roth IRA incoming conversion, but you really don't need to do anything with that on your tax return unless/until you start withdrawing from your Roth.

 

[braumeister]

I didn't start Roth conversions until well after 59-1/2 so can't answer directly. I've been code 7 all along.

Yes, code 7 is the standard for most, whether you take the money or convert it to a Roth.