1099-R problem

[Kram BergGold]

Client converted Traditional IRA to Roth. The 1099-R shows the amount in box 1 and the same amount as taxable in box 2, which makes sense to me. However, box 7 has a code of G. Is this correct?

[appelman]

Maybe technically correct.

There doesn't seem to be any other code that fits.

[jimenright]

This should be

a code 2 or code 7. See instructions for 1099 R

[appelman]

I guess you're right.

(Didn't read all the fine print.) I don't suppose it would matter unless the IRS tries to "correct' the return and refund some tax. To forestall this, you might want to include a disclosure stating what you think the code should be. Trying to get an amended 1099-R is usually an exercise in futility.

[taxmom34]

wouldn't it depend if the traditional IRA was deductible or not and a form 8606 would show that. but my thinking is how does issuer know ? a Roth is taxable isn't it?

[appelman]

Good point.

The custodian seems to be assuming that it was fully deductible, but on what grounds?

Don't quite understand your second question. ROTH's are a whole different kettle of fish. For the next five years, withdrawn earnings on the ROTH would be taxable, but withdrawals would be taken first from basis.

[taxmom34]

my thinking is that Kram has a 1099R with code G (direct rollover) which was a transfer of a traditional IRA to a Roth.
without knowing if the traditional was deductible or not the issuer assumed it was deductible and the transfer to the Roth is a taxable event. isn't making a contribution to a Roth taxable. this was not a distribution, right?

[Lion]

Almost. The distribution from a traditional IRA would be taxable, lacking any 8606 to the contrary. The contribution to the Roth is not taxable as the funds will have been taxed in the past or appear on the current tax return to be taxed.