Traditional IRA to Roth

[Margaret CPA in OH]

Client and spouse have converted all their traditional IRA's to Roth IRA's. For each of them, $5000 were in nondeductible IRA's. If I input, per the 1099R, taxable amount not determined, it shows on Line 7 of 8606. If I input that all is taxable and complete Part II of 8606, it seems to calculate correctly. However, Part I, second bullet point seems applicable "You took distributions from a traditional...and you made nondeductible contribution to a traditional IRA in 2010...For this purpose, a distribution does not include a...conversion.." Part II states it's all about conversions.

So do I input according to the 1099R or what my instinct tells me supported by correct calculations?

[LindaB]

I looks like it should be in part II, total amount on line 16 and the nondeductible part on line 17. Line 7 in part I says do not include conversion amounts there. Do it so it comes out correctly, you don't want them to pay tax on the nondeductible part again.

[Margaret CPA in OH]

I understand that is where the details go on the 8606. My question was about properly entering the data shown on Form 1099R. If I do not put in the whole amount as taxable (although the 1099 has nothing there and box is checked for taxable amount not determined), nothing goes to the right place. Soooooo, I followed my instinct to get everthing to the right place. It was even better when I actually input the basis at 12.31 on Part I line 2. Everything calculated correctly and the carryover sheet is great showing how much will be taxed in 2011 and 2012, lest the client forget.

A lesson I take from this is that the software is really pretty good for putting the numbers in the right place but it is helpful to know where things should end up. If I input the 1099R exactly as presented and didn't tweak or look at the forms, errors would have been made.

Thanks for insights.

[Pacun]

How about if the client wants to pay all taxes in 2010 tax year? I have entered amounts on 1099-R line 1 and 2. On form 8806, line 2 and 7 are populated by ATX. If I check to top of form 8806 to state that I want to pay everything in 2010, do I need to do anything else?