Does anyone use Turbo Tax for estimating ROTH conversion taxes?

[tenant13]

I THINK doing small conversions for the next 10 years might be tax neutral for me so why not. But I've never done one, never seen 1099-R form and have no clue what to enter into TT in order to estimate conversion taxes.

Could someone please post an example of what goes into which box (based on your own 1099-R) so I could play with numbers? Something like: Box 1: xxx, 2a:xx, 2b (which one is checked), 7: (is it B-designated ROTH account distribution), 8- (percent) etc. etc. There's a lot of boxes that TT is asking about but I wonder how many are actually relevant.

 

[RunningBum]

I don't bother with filling out a 1099-R. Just call it interest. It works out the same because both are regular income.

Even easier than using TT is using a tax estimator like https://www.irscalculators.com/tax-calculator. Fill in your numbers from 2021 and see if it matches what TT gave you, to make sure you don't have anything special that the estimator isn't handling. Then add the conversion amount to "Other Income".

 

[target2019]

Use the TurboTax what-if worksheet. Copy 2021 to a new column. Make adjustments if any are necessary. Add the conversion amount to an income line. You'll see tax go up by the appropriate amount.

 

[MBAustin]

Use the TurboTax what-if worksheet. Copy 2021 to a new column. Make adjustments if any are necessary. Add the conversion amount to an income line. You'll see tax go up by the appropriate amount.

+1. I find this very useful to model different scenarios of Roth conversions and contributions to our donor advised charitable fund to offset at least some of the tax impact.

 

[tenant13]

Use the TurboTax what-if worksheet. Copy 2021 to a new column. Make adjustments if any are necessary. Add the conversion amount to an income line. You'll see tax go up by the appropriate amount.

So you're saying not to bother with entering a hypothetical 1099-R? I was like: "Ooof, a lot of boxes I know nothing about"

 

[foxfirev5]

Am I the only one who manually does their taxes? Being totally familiar with your tax situation has benefits. For example DW hit a jackpot at the casino and called me, back in our "free" hotel room, with the W-2G info. A few seconds later I knew the tax impact, and then I confirmed the result with my phone calculator. BTW this is easily translated to Roth conversions and a multitude of situations. I routinely run future taxes on my spreadsheet (3x5 card).

 

[TheWizard]

I just multiply the converted amount by 24% and then do an estimated payment of that amount or a bit less.
No need for anything more complicated than that...

 

[tenant13]

I just multiply the converted amount by 24% and then do an estimated payment of that amount or a bit less.
No need for anything more complicated than that...

That sounds pretty good to me, thanks.

 

[Midpack]

So you're saying not to bother with entering a hypothetical 1099-R? I was like: "Ooof, a lot of boxes I know nothing about"

TT will complete the appropriate additional forms when the time comes. But as others have said unless you have non-deductible tIRA contributions **, it’s taxable income like any other, e.g. interest. Using a duplicate of your last years return modified to adding Roth conversions using TT is a great way to see the impact (just increase interest as others have said).

** If you have non-deductible contributions (like me), TT will walk you through a form 8606 to determine the taxable income portion of your conversion - also pretty straightforward. I’ve been doing Roth conversions for years, it’s not rocket surgery tax wise.

 

[audreyh1]

Use the TurboTax what-if worksheet. Copy 2021 to a new column. Make adjustments if any are necessary. Add the conversion amount to an income line. You'll see tax go up by the appropriate amount.

Same here - I use the what-if worksheet, and simply input any RMD as additional ordinary income. I don't bother with creating a 1099-R. It's just income taxed at ordinary rates. If you expect to take out charitable gifts, then subtract that from the RMD amount.

It's also easy to add SS income into the what-if worksheet and TT will do all the related calcs for you.

Simple, and a few columns for comparison. Then I take numbers to put into a larger tracking spreadsheet.

 

[pb4uski]

Am I the only one who manually does their taxes? ...

Yes, very likely. Neanderthal.

I have a spreadsheet that I have verified the formulae by comparing the results to TT.

 

[target2019]

So you're saying not to bother with entering a hypothetical 1099-R? I was like: "Ooof, a lot of boxes I know nothing about"

You're free to do whatever works, but it is not necessary. As someone else pointed out, you could add the conversion to an interest box, and effectively you get the additional tax number you're looking for.

I prefer the what-if worksheet as there are other changes I may be considering, or next year's income data and expenses changes significantly.

And I can't mistakenly save changes to my historical tax filing either.

 

[thefist]

I did create a 1099R the first time I did it. Now, I copy last year’s return and edit it. As said above, doing it the right way is a learning experience. I’ll change the conversion amount to $1 before I determine what I want to convert.

 

[target2019]

Am I the only one who manually does their taxes? Being totally familiar with your tax situation has benefits. For example DW hit a jackpot at the casino and called me, back in our "free" hotel room, with the W-2G info. A few seconds later I knew the tax impact, and then I confirmed the result with my phone calculator. BTW this is easily translated to Roth conversions and a multitude of situations. I routinely run future taxes on my spreadsheet (3x5 card).

I'm pretty sure that using tax software and spreadsheets doesn't result in one losing the abilty to make mental calculations or do estimates on a card or sheet of paper. For future generations I cannot say...

I know our effective total tax rate was about 10% for 2021, and our combined Fed/State bracket for 2022 will be about 25%. Bracket headroom is something, but not as important to us (no gambling, lottery, windfall projected). YMMV.

 

[cathy63]

There are times when it's helpful to create a return as close to the real one as possible. I do this because my IRA has a basis due to having made non-deductible contributions back before Roths were invented. Therefore, increasing the conversion by $1K does not increase our income by the full $1K. Entering the numbers as a 1099-R causes TTax to fill out the 8606 and figure the taxable portion of the conversion for me.

Also, in past years where we had a passive loss carryover on a rental property, it was useful to have an accurate Schedule E in the return I was playing with because adding ordinary income from a Roth conversion affects passive loss limitations on Sched E.

Using a "real" return allows me to change just one number (the conversion amount) and have the entire return recalculated. The "what-if" worksheet is a good tool, but it doesn't handle this case.