Is there another form to fill out along with the 1099-R ?

[Guest KirkD.]

In 2000 I "rolled-over" a 401(k) into a "self-directed" IRA. In the same year I did a partial conversion of the IRA into a ROTH.

Well, as we all know , the market got ugly !

My ROTH was worth MUCH less than at the time of the conversion so I "recharacterized" the ROTH back into the Traditonal IRA in November 2000.

I've received two 1099-R forms , one showing the conversion( and a hefty taxable amount ) and the second showing the "recharacterization" without a taxable amount.

My question is( I'm trying to use TurboTax) : How do I file BOTH of these forms for tax purposes ? I've tried filing the 1099-R with the taxable amount and it got depressing! I can't find a method to file while indicating to the IRS that the transaction is not valid.

Thanks!

[Appleby]

I am not familiar with the use of Turbo tax, but I assume it mirrors the IRS Form 1040. The amounts on the 1099-Rs should be reported as non-taxable. To do this, report the total on line 15a of the 1040. On line 15b(taxable amount), put zero. This lets the IRS knows that the amount was rolled over, either through a recharacterization or otherwise. You must also file IRS Form 8606 to report the recharacterization

[John G]

If I understand your question and circumstances, you recharacterized the entire partial Roth conversion in the same year as the partial conversion. If so, then you have no tax liability for any conversion.

[Guest KirkD.]

John ,

Yes , I "recharacterized" ( Learning to love that word !)the entire ROTH within the same year. I understand that there in't a tax liability but my problem is trying to report the transactions as listed on both of the 1099-R forms without incurring the wrath of the I.R.S.

Do I just ignore the 1099-R forms ?

I'm looking at the 8606 that Appleby mentioned and , hopefully , will be able to stumble through that without pulling out the remainder of my hair !

I really appreciate the assists!

[Appleby]

If I may..

You cannot ignore the 1099-Rs. The amounts must be reported as a distribution that is non-taxable. Follow my instructions in my response above. This would be the same for a distbrution that is rolled over within 60-days or a direct rollover from a qualifed plan to your IRA, i.e. they are both reportable, but NOT taxable.

The instructions to completing the 8606 is very helpful. You may find it here.

http://ftp.fedworld.gov/pub/irs-pdf/i8606.pdf

One problem most filer find with the recharacterization is that, the conversion and the recharacterization are different figures- they do not balance. This is something the IRS understands, but if it makes you feel better, you could include an explanation that the market value of the IRA was reduced.

Hope this helps- if not - just state your question.

[Guest KirkD.]

Appleby ,

Thanks for hanging in there - you have been EXTREMELY helpful.

With the information you've supplied thus far , I'm sure I'll be able to "feel" my way through the form.

Strange as this may sound , but I've called TWO c.p.a. friends ( both own firms that handle corporate business )and neither were sure as to how to handle this situation.

I guess that institutions just don't go around switching their ROTH(s) back and forth .

Again - many thanks!

[Appleby]

You're welcome Kirk.

Glad I was able to help.