1099-Q distribution rolled over to Roth IRA

[dy]

Effective for the 2024 tax year, any unused funds in a 529 plan can be rolled over to the beneficiaries Roth IRA under certain circumstances. This is new and I don't know how to show the 1099-Q being rolled over.  There is a way to show that it isn't taxable on screen 14, but then it doesn't show anything at all on the federal or NYS return.  Lacerte isn't helpful on this as I don't think they know about this.

[George4Tacks]

I did find these drat instructions for the 1099-Q https://www.irs.gov/pub/irs-dft/i1099q--dft.pdf 

It would appear there are some new boxes!

What’s New
New checkbox 4b. Box 4 now has two checkboxes, 4a to
report trustee-to-trustee transfers and 4b to report a QTP to a
Roth IRA transfer.

Maybe we just need to wait a bit for the program to have an input for this magic box. 

The draft 1099Q https://www.irs.gov/pub/irs-dft/f1099q--dft.pdf 

Boxes 4a-4b. Show whether a transfer was made from a trustee-to-trustee (from one QTP to another QTP, one CESA to another CESA, a CESA to a QTP, or a QTP to an ABLE account), or from a QTP to a Roth IRA. However, in certain transfers from a
CESA the box will be blank.                      

My guess is that you really will not need to indicate anything special, since it was an institutional transfer.

[qbteachmt]

Just to  clarify:

It's not "any" funds.

It's limited to the Roth IRA annual contribution (it's in lieu of the contribution process, so an offset) for each year, and the beneficiary has to be eligible for contributing (has earned income). There is a max lifetime amount per beneficiary of $35k, so that's over 5 years minimum. It's still subject to the Roth IRA 5-year rule, so no contribution made in the most recent 5 years would be eligible yet. The 529 account for the designated beneficiary must have existed for at least 15 years.

[dy]

I'm not yelling at anyone.  It's just that Lacerte didn't respond with anything helpful.  And yes I know about the restrictions.  That's why i stated "under certain circumstances."

Thank you

[George4Tacks]

This is partially why Lacerte directs question here for support. Phone support can be help for that which is and not so much for that which will be. 

[M Barnett]

I like this answer and draft forms a lot but the instructions for the draft form show its for 2025 tax year. 

So the 2024 1099-Qs are going out with the old format so trying to show on the program / return the 1099-Q and roth contribution seem like they need an update on the forms and programs for us to enter correctly.

have the same issue in proseries 2024

[George4Tacks]

My guess:

Since 1099-Q has never been a strong suit for IRS to match, this is likely to fall in that black hole where you just document that NONE of the distribution or earnings is taxable. Warn the client that even with all the software worksheets that show NONE of the reported 1099-Q is taxable, the worksheets never make it to IRS and they could send a letter. Tell them all is well and you have the documentation to back up the facts if they ever come and ask.

Just a general question - Have you ever had a client get a 1099Q inquiry? I have only ever encountered one. 

https://www.irs.gov/publications/p590a#en_US_2024_publink1000129982

[George4Tacks]

While the site was done I found THE DEFINITIVE ANSWER!! STRAIGHT FROM THE ULTIMATE SOURCE FOR ALL OF INTUIT'S SOFTWARE!

It appears my guess was right. https://ttlc.intuit.com/community/retirement/discussion/my-son-received-a-1099q-for-a-7k-distributio...

😉

[qbteachmt]

"STRAIGHT FROM THE ULTIMATE SOURCE"

Oh, you're just jealous. You know you're the ultimate source. Take a bow.