Roth Conversion/Distribution

[jlewis]

From Pub 590 -

a)Later withdrawals from Roth IRA. If you include the taxable part of a 2010 conversion in equal amounts over the 2-year period (2011 and 2012) and in 2010 you withdraw from the Roth IRA any amount allocable to the taxable part of the conversion, you will generally have to include in income for 2010 the part of the withdrawal made during the year that is allocable to the taxable part of the conversion.

Any amount allocable to the conversion that is included in income in 2010 because of the distribution from the Roth IRA first reduces the taxable amount that is reportable in income in 2012. The taxable amount that is reportable in income in 2011 is reduced next. The most that can be included in income because of the withdrawal of a conversion amount for any one year is the total amount required to be included in income for 2011 and 2012 minus the amounts included in income in all preceding years in the period.

b)Example. In April of 2010, John, age 50, rolls over $20,000 from his traditional IRA to a Roth IRA. This is John's first contribution or rollover to a Roth IRA. There is no basis in the $20,000 rollover. In August of 2010, John withdraws $10,000 from the Roth IRA. When John completes Form 8606 for 2010, he enters $20,000 on lines 16 and 18 of Form 8606, and $10,000 on line 20a and $10,000 on line 20b. Since the $10,000 distribution John received from the Roth IRA is nonqualified, he completes Part IV of Form 8606 and has a taxable distribution of $10,000 on line 36.

Question - according to example , 2010 taxable withdrawal is not reflected on 2010 form 8606 Part II line 20b, was wondering if anyone thought it should or would and how it will be?

[jainen]

>>the amounts included in income in all preceding years in the period<<

Although Line 20b is supposed to be carried over to 2012, it can't be the final number because further withdrawals could happen even in 2011. Presumably when it comes time to actually file 2011 and 2012, Form 8606 will have a new section or worksheet to show "minus the amounts included in income in all preceding years of the period." Quickfinder already has one.

[jlewis]

Thanks for the response, I feel better that IRS & ATX are on top of this (possibly a little sarcasm on my part).

Another question-8606 instructions (pg 3) say when this occurs to attach a statement to the return explaining recharacterizations, which seems to indicate paper filing. I called ATX support, they weren't sure & didn't think the program included this requirement. If anyone else has had the situation I would appreciate their input. I did create the efile to see what error messages popped up and it was not mentioned and would create efile.

[Lion EA]

My software has a Return Notes and Return Lists that ARE transmitted with the return and Preparer Notes that are NOT. Your software probably has different terminology but similar functions.