How to Report Roth Conversion in TurboTax

Performing a Roth IRA conversion is a powerful financial move, but telling the IRS about it can feel like a maze. Inputting the information incorrectly can lead to an unexpected tax bill or even penalties. This guide walks you through exactly how to report your Roth conversion in TurboTax, step-by-step, ensuring your tax return is accurate and you understand the reasoning behind the conversion.

What a Roth Conversion Is (and Why the IRS Cares)

In simple terms, a Roth conversion is the process of moving funds from a traditional, pre-tax retirement account—like a Traditional IRA, SEP IRA, or old 401(k)—into a post-tax Roth IRA. Because the money in the traditional account has never been taxed, the IRS wants its share when you make the move.

The amount you convert is generally added to your taxable income for that year. For example, if you convert $50,000 from a Traditional IRA to a Roth IRA, you will likely need to add that $50,000 to your income on your tax return. The benefit? Once the money is in the Roth IRA, it grows tax-free, and all qualified withdrawals you take in retirement are also 100% tax-free.

This process is also the second step of the popular "backdoor Roth IRA" strategy, where you make a non-deductible contribution to a Traditional IRA and then promptly convert it to a Roth IRA. Regardless of your reason for converting, the reporting process in TurboTax is the same.

First, Gather Your Key Document: Form 1099-R

Before you even open your tax software, you’ll need a crucial document. In January following the year of your conversion, the financial institution holding your Traditional IRA (like Fidelity, Vanguard, or Charles Schwab) will send you a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

This form details the movement of money out of your pre-tax account. It might look intimidating, but only a few boxes are critical for reporting the conversion:

• Box 1 - Gross distribution: This shows the total amount you moved to your Roth account. If you converted $50,000, Box 1 will say $50,000.
• Box 2a - Taxable amount: This box can be tricky. Sometimes, it will be the same as Box 1. Other times, it might be blank or show $0. Do not panic if this is the case—TurboTax will help you calculate the correct taxable amount later on.
• Box 2b - Taxable amount not determined: If this box is checked, it’s a clear sign that you and TurboTax are responsible for figuring out the taxable portion of your conversion. This is very common for IRA distributions.
• Box 7 - Distribution code: This little box is one of the most important on the form. It tells the IRS why you took the money out. For a Roth conversion, you will typically see one of two codes:
  • Code 2: "Early distribution, exception applies." You’ll often see this if you are under age 59 ½. The "exception" is that you moved it to another retirement account (your Roth IRA), so you won't owe the 10% early withdrawal penalty.
  • Code 7: "Normal distribution." You will see this code if you are age 59 ½ or older.

Once you have your 1099-R in hand, you're ready to log into TurboTax.

Step-by-Step Guide to Reporting in TurboTax

Follow these steps carefully to ensure your conversion is reported correctly. The specific screens might vary slightly based on your version of TurboTax (Online, Desktop, etc.), but the questions and logic are the same.

Step 1: Navigate to the Retirement Income Section

After logging in and completing the initial steps, you need to get to the income section of your return.

1. Click on Federal from the side menu and then Wages & Income.
2. Scroll down until you find the section labeled Retirement Plans and Social Security.
3. Find the line item for IRA, 401(k), Pension Plan Withdrawals (1099-R) and click Start or Revisit.

Step 2: Enter Your Form 1099-R Information

TurboTax will now prompt you to add your 1099-R. You can often import it directly from your financial institution, but entering it manually is just as easy and ensures you review it for accuracy.

Click the option to Type it in myself. You'll see a screen that looks just like the paper form. Carefully transcribe the information from your 1099-R into the corresponding boxes on the screen, paying close attention to Boxes 1, 2a, and 7.

Step 3: Answer the Follow-Up Questions (This Is the Key Part!)

After entering the numbers, TurboTax needs to understand the story behind them. It will ask a series of questions to determine whether this was a penalty-free conversion or a taxable withdrawal. The next screens are where many people go wrong.

1. "What Did You Do With The Money?": The system will present you with several choices. You must select the choice that indicates you moved the money into another retirement account. This choice will likely be worded as:

   • “I moved the money to another retirement account (or returned it to the same account)” or “I rolled over some or all of it to an IRA or other retirement account within 60 days.”

   Be careful not to select any option that says something like, “I did not roll over this money,” as that will make the entire distribution taxable and potentially subject to a penalty.

2. Specify the Type of Move: On the following screen, TurboTax will ask for specifics about the move. You must tell it you converted to a Roth IRA. Select the option that says:

   • “I converted all of this to a Roth IRA.” (Or "some," if that was the case).This is the switch that tells TurboTax to treat the distribution listed on your 1099-R as a conversion event on your tax return.

The Pro-Rata Rule and Form 8606

If your conversion was a straightforward move of pre-tax money, you might be done. However, TurboTax will likely ask you more questions to determine if a portion of your conversion is tax-free. This is where Form 8606, Nondeductible IRAs, and a concept known as the "pro-rata rule" come into play.

This rule applies if you have any after-tax (non-deductible) money in any of your Traditional, SEP, or SIMPLE IRAs—not just the one you converted from. The IRS views all of your non-Roth IRAs as one big bucket. You cannot simply convert only the after-tax money from that bucket to avoid taxes; any conversion is considered a proportional mix of pre-tax and after-tax dollars.

To calculate this, TurboTax will ask you for two key pieces of information:

1. Your basis in traditional IRAs: "Basis" simply means the total amount of non-deductible contributions you've ever made that you haven't already withdrawn or converted. If you've only made deductible contributions, your basis is $0. If you’ve made non-deductible contributions (the first step of a backdoor Roth), you'll find your prior-year basis on Line 14 of your 2022 Form 8606.
2. The total value of all your traditional, SEP, and SIMPLE IRAs as of December 31, 2023: You need to add up the year-end balances of all your non-Roth IRA accounts.

An Example of the Pro-Rata Rule in Action

Let's say Jane has two Traditional IRAs. One has $94,000 in pre-tax money from old 401(k) rollovers. She also contributed $6,000 of non-deductible funds to a second Traditional IRA this year. Her IRA details are:

• Total IRA value at year-end: $100,000 ($94,000 + $6,000)
• Total IRA basis (after-tax money): $6,000

Her after-tax basis makes up 6% of her total IRA balance ($6,000 / $100,000). Now, she decides to convert $6,000 to her Roth IRA. Per the pro-rata rule, only 6% of that conversion is tax-free.

• Tax-free portion: 6% of $6,000 = $360
• Taxable portion: 94% of $6,000 = $5,640

Even though she tried to convert only her after-tax contribution, she still ends up with $5,640 of taxable income. TurboTax handles this calculation perfectly on Part II of Form 8606, but it needs your correct basis and year-end IRA values to do so.

Final Review: Check Your Tax Forms

After you correctly enter all the information, TurboTax will generate the necessary forms. Before you file, take a moment to review them. In the online version, you can typically find a preview under "Tax Tools" ➔ "Tools" ➔ "View Tax Summary," and then look for a "Preview my 1040" option.

• Look at Form 1040: You will see the results of your conversion on Lines 4a and 4b (for IRAs). Line 4a will show the gross distribution from your 1099-R, Box 1. Line 4b will show just the taxable portion of that amount. If everything was pre-tax, these two numbers will be the same.
• Look for Form 8606: If you had any after-tax basis, TurboTax should have generated this form. Look at Part II, "Conversions From Traditional, SEP, or SIMPLE IRAs to Roth IRAs." You can follow the calculation to see how the software determined your taxable amount.

Final Thoughts

Reporting a Roth IRA conversion in TurboTax is a manageable process when you follow the prompts and understand your source documents. The keys are entering your Form 1099-R precisely, clearly telling the software you performed a conversion, and providing an accurate basis if you have non-deductible IRA dollars.

Accountants often face more complex questions around Roth strategies, such as multi-year planning or fixing incorrect filings. When research is required to provide sound advice, searching through endless IRS publications and forums is a waste of valuable time. We designed Feather AI to give tax professionals instant access to citation-backed answers, so you can resolve complex issues in seconds and stay focused on high-value client advising.