529 Plan distribution/rollover to a Roth IRA

[dsacpa]

Client rolled over $7,000 to a Roth from his MD 529 Plan.  There were earning and basis as part of the distribution.  The earnings should not be taxed or subject to the 10% penalty, but ProSeries 2024 is doing both at the moment.

How do I enter this transaction or report the non-taxability and penalty exemption?

[Terry53029]

Go to rollover information on the 1099R worksheet (about 2/3 way down) and check box "entire distribution rolled over" As long as it was under $35000

[dsacpa]

Thanks, but there is NO Form 1099-R from the MD529 Plan.  They received a Form 1099-Q referencing the $7,000 trustee-to-trustee transfer only.

I found that this is considered a qualified educational expense, so at the moment, I have the $7k as an other QEE.  This allows the rollover to NOT be taxable and not subject to the penalty.

I'm wondering if this is the proper reporting in ProSeries and on the tax return???/

[George4Tacks · Accepted solution]

https://accountants.intuit.com/community/proseries-tax-discussions/discussion/trustee-to-trustee-tra...

https://accountants.intuit.com/community/lacerte-tax-discussions/discussion/1099-q-distribution-roll...

If you are sure it is not taxable, which is probably correct, then do anything you can to make it not taxable. 

[TaxGuyBill]

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@dsacpa wrote:

I'm wondering if this is the proper reporting in ProSeries and on the tax return???/

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Where are you expecting it to show up on the tax return?

Non-taxable distributions from a 529 Plan don't show up anywhere on the tax return, so there is no need to enter anything.

[dsacpa]

I'm not formally expecting to see it on the return anywhere, but when I entered the 1099-Q info with Gross, Earnings and Basis and the program automatically taxes and penalizes the earnings. But...if you enter some "other QE expenses" then the taxable amount and penalty disappears.

So, I'm just looking for some ProSeries program input assistance.

[Terry53029]

If it is a 1099Q, for trustee to trustee roll over then you do not need to put on tax return. My first answer was if you received a 1099R. At year end your client should receive 5498 showing the roll over. (not a taxable event)

[TaxGuyBill]

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@dsacpa wrote:

So, I'm just looking for some ProSeries program input assistance.

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Delete the information you entered into ProSeries about the 1098-Q.