March 24, 2021 at 3:13 am #16909
In early 2020, i made two RMD’s, X and Y from IRA A. Within 60 days i rolled both back into IRA A, and subsequently converted both into existing Roth Z.
Fidelity reports only the gross withdrawal on 1099 R for IRA A , then sends me a note saying I should consult a tax pro on how to handle rollovers on 1040!
Rollover X shows up on IRA A’s 5498 as a “rollover contribution” Rollover Y shows up on Roth Z’s 5498 as a ‘rollover contribution”
Brief WSJ article says show gross amount on line 4a, put net amount after rollovers on 4b (taxable amount), and write “rollover” next to it.
Is this correct? Does IRS need more? HRBLOCK software has problem handling this situation.
WJMarch 24, 2021 at 2:41 pm #16987
You need to report the conversion on Form 8606. For some tax programs you must enter it as a conversion, not a rollover. The taxable amount of the conversion ends up on line 4b of Form 1040, and “rollover” should show next to 4b. 4a should show the total amount of all the 1099R forms, but 4b should only show the amount converted. I assume you had no basis in the TIRA.
In other words, you would enter the normal rollovers into the program and separately enter the conversion. Line 4 will show the combined result. In case any question arises about the one rollover limit, Notice 2020-51 seems to absolve any would be 2020 RMDs returned by 8/31 from that limit.March 24, 2021 at 4:03 pm #16998
Thank you Alan. Very helpful.
What is a “normal rollover’?
Between Fidelity’s poor reporting (nowhere have they given me a figure for the total amount converted) and Block’s program, seems like a relatively simple transaction has become complicated to report to the IRS.
WJMarch 24, 2021 at 5:52 pm #17016
By “normal”rollover I meant to an account of the same type. A conversion is to a different type (Roth IRA). You did two normal rollovers of distributions to your TIRA and one conversion to your Roth IRA.
Fidelity added up all 3 distributions and reported them on a single 1099R coded 7. You know how much you converted, and that is the portion to report on the 8606. The taxable line 18 of the 8606 should also end up on line 4b of Form 1040.
NOTE: The 5498 for the Roth should show the contribution as a conversion in Box 3, not in Box 2. It doesn’t? This should agree with the amount to be reported on the 8606 as a conversion.
I believe that for HRB you enter the amounts you rolled back to the TIRA as a rollover, but the amount you converted as a conversion, not a rollover. Look for a question that asks about conversions.
Let’s say that the original RMDs were 30,000 and you rolled them back and then converted 30,000. Your 1099R should show 60,000, of which 30,000 should be reported as a rollover and 30,000 as a conversion. 60,000 ends up on line 4a and 30,000 on 4b and on Form 8606. Hope this helps.March 24, 2021 at 11:43 pm #17070
I had expected Fidelity to report to me and to the IRS the dollar amount of the conversions I made from two IRAs to one Roth. This figure (in total or individually) is nowhere to be found. All – some 20 odd- conversions were in shares of stock or mutual funds and my confirmations show only the shares, not the dollar amount (which is supposed to be based on the closing price that day).
From records I’ve kept, I think I know approximately the right number for the total of my conversions, but I don’t know how this might jibe with something Fido has reported to the IRS.
I guess i’ll get a copy of 1040 instructions and see exactly what info is required for line 4b. A considerable amount of tax dollars are involved in this issue.
WJMarch 25, 2021 at 4:40 pm #17200
Just look at your Roth IRA statement for the period of time that the conversion was done. It should show a dollar value received by the Roth IRA, not just shares. The 2020 5498 must also show the dollar amount received by the Roth IRA, and it should show as a conversion (not rollover) contribution. You may not have received the 2020 5498 yet as they are not due until May (maybe June this year due to the filing due date extension). If any question, call Fidelity and they can provide the figure. They need it for Form 5498. The confirmations will not provide this info. I would not bother with the 1040 Inst, since you are looking for the gross amount converted, not how to report it. You will need Form 8606 to report your conversion, and what you are missing is the amount to go on line 8 of the 8606.
It is correct that the 1099R forms will not provide a separate conversion amount when there were other non conversion distributions in 2020 from the same IRA account.
Finally, if you have any basis in your TIRA and file Form 8606, the amount on 4b will be less than the gross amount converted because a portion will be non taxable. Form 8606 will show the taxable amount on line 18 if you have IRA basis. If you have no basis (most do not), then ignore this paragraph.
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