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Category: Tax Advice

What is an IRA Rollover vs. an IRA Conversion?

If you "roll over" an IRA you are moving it from one company to another. You have 60 days from the time you receive the funds from one company to invest it with the other company before it becomes taxable to you. To make an entry for an IRA Rollover in our program go to Federal section > Enter Myself > IRA/Pension and Social Security Benefits >Add or Edit an IRA- 1099-R > then make your entries and mark the check box in the lower left corner of the screen. It states "Check here if all/part of the distribution was rolled over, and enter the rollover amount."

If you CONVERT an IRA you are CHANGING it ("converting it") from a traditional IRA to a ROTH IRA. When you do this you take the amount you changed from a traditional IRA to a ROTH and enter that in Part II of Form 8606 (Nondeductible IRAs) . To make this entry in our program go to Federal section > Deductions > Enter Myself > Adjustments > Nondeductible IRAs (Form 8606) . Make the entry on the line that states "Basis in Roth IRA conversions". Then you should also enter the taxable amount from Form 8606 line 18 in box 2a of the 1099-R. (This is on the 1099-R form that you received from the payer.)

Then complete Part I of Form 8606 if you have any non-deductible traditional IRA contributions that would factor into the taxable portion of the conversion. Enter this on the line stating "Contributions made from January 1 through April 15"