Form 1099-R - Roth IRA Converting From a Traditional IRA

Generally, Code 2 is reflected on the Form 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. received from the payer of the distribution for a Roth IRA conversion, where a Traditional IRA is converted to a Roth IRA.

Per IRS Publication 590-A Contributions to Individual Retirement Arrangements (IRAs), on page 29:

Income. You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you hadn’t converted them into a Roth IRA. These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA.

You don’t include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed under Are Distributions Taxable in Pub. 590-B.

The Form 1099-R distribution data must be entered in TaxAct for Form 8606 Nondeductible IRAs to calculate.

To access the entry fields for Form 1099-R to enter the information when a Traditional IRA is converted to a Roth IRA:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Retirement Plan Income in the Federal Quick Q&A Topics menu to expand, then click IRA, 401(k) and pension plan distributions (Form 1099-R).
  3. Click + Add Form 1099-R to create a new copy of the form or click Edit to review a form already created.
  4. Click Quick Entry to scroll down to answer all applicable questions or click Step-by-Step Guidance to proceed with the program interview questions.
  5. On the screen titled Retirement Plan Income - Distribution Amount, enter the 1. Gross distribution and 2a. Taxable amount amounts, then click Continue.
  6. On the screen titled Retirement Plan Income - Box 7, check 7. IRA/SEP/SIMPLE, select the code designating the type of distribution from the 7. Distribution code drop-down, then click Continue.
  7. On the screen titled Retirement Plan Income - Roth Conversion, enter the Roth IRA conversion amount, then click Continue.

The converted amount will be reflected on Form 8606, Line 16 and the taxable amount will appear on Form 8606, Line 18 which will then be transferred to Form 1040 U.S. Individual Income Tax Return, Line 4b.

If you have a basis in the converted amount, the taxable amount may be reduced. You will want to check Prior year nondeductible traditional IRA contribution(s) on the screen titled Retirement Plan Income - Nondeductible IRA Contributions when going through the Form 1099-R section of the Q&A. Then, when you get to the Form 8606 section of the Q&A (right after the Form 1099-R section), you will enter your basis in ALL traditional IRAs on the screen titled Nondeductible IRAs - Basis in Traditional IRAs. Finally, on the screen titled Nondeductible IRAs - Basis in Roth Conversions, you will need to review and/or modify the Basis you had in the amount that was converted. Based on these entries, the TaxAct program will calculate the appropriate taxable amount to transfer to Form 1040.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.