What Tax Forms Are Required for Converting a Traditional IRA to a Roth IRA?

by Mark Kennan

Converting to a Roth IRA from a traditional IRA lets you secure your current tax rates on the money so that you can take tax-free qualified distributions and avoid minimum required withdrawals as long as you live. To ensure you get these benefits, you need to make sure you submit all the required tax forms.

Form 1099-R

The Form 1099-R documents your distribution from your traditional IRA for IRS records. You should receive this form after the close of the calendar year so that you can attach it with your income tax return. In addition to showing the amount of the conversion, it also shows the amount of federal income taxes withheld from your conversion. Reporting this amount on your income taxes reduces your taxes due.

Form 8606

You use Form 8606 to figure out the taxable portion of your traditional IRA-to-Roth IRA conversion. If you never made a nondeductible contribution to your traditional IRA, the Form 8606 will report that your entire conversion counts as taxable income. However, if you made nondeductible contributions, Form 8606 is especially important because it determines how much of your conversion does not require you to pay income taxes. Form 8606 must be included with your Form 1040 or Form 1040A tax return.

Form 5329

If you take money out of your traditional IRA when you are under 59 1/2 to pay the taxes on the conversion from a traditional IRA to a Roth IRA, you have to pay a 10 percent early withdrawal penalty. Form 5329 calculates that penalty for you and gets attached to your Form 1040 tax return do show the IRS how you arrived at your penalty figure. If you converted money from your traditional IRA to your Roth IRA and did not withdraw any of it, you do not have to complete Form 5329.

Form 1040 or Form 1040A

For most traditional IRA-to-Roth IRA conversions, you can file your income taxes with Form 1040 or Form 1040A. However, if you owe an early withdrawal penalty and had to complete Form 5329, you must use Form 1040. On either Form 1040 or Form 1040A, report the total amount of the conversion as a nontaxable distribution and then report the taxable portion, as calculated with Form 8606, as a taxable IRA distribution. If you had any money withheld from your conversion for income taxes, include that as part of your federal income tax withholding for the year.

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