Roth Conversion Reporting
Rev. 02/05/10; E-mail Alert 2010-2

With the Pension Protection Act of 2006 permitting funds in a qualified plan, 403(b) or governmental 457(b) to be directly rolled to a Roth IRA as of 2008, provided the AGI was under $100,000 and, if married, the taxpayers filed jointly; there have been many questions about reporting these transactions on Form 1099-R. Coupled with the relatively new designated Roth source and the new Roth Conversion rules for 2010, there has been even more confusion about reporting the various transactions on Form 1099-R. Below are some fact sets and examples of Form 1099-R reporting. Click here to see a 2009 Form 1099-R.

FACT SET ONE: Non-ROTH Qualified Plan Distribution Direct Rollover to Roth IRA

> Distributable event: severance of employment
> Participant has $120,000 balance in the qualified plan and has no IRAs
> $108,000 of Employer contributions, Employee non-Roth contributions. Plus earnings
> $12,000 of after-tax employee contributions
> Participant directly rolls $120,000 to Roth IRA
> How is it reported on Form 1099R?

Form 1099-R
Box 1: $120,000 (Gross Distribution)
Box 2a: $108,000 (Taxable Amount)
Box 4: $0 (Federal income tax withholding)
Box 5: $12,000 (non-Roth after-tax basis)
Box 7: Code G

FACT SET TWO: Designated ROTH Partial Distribution by Direct Rollover to Roth IRA

> Distributable event: severance of employment
> Participant made designated Roth deferrals since 2007 and has no other money in the plan
> Participant has $20,000 balance
> $18,600 of designated Roth contributions. $1,400 of earnings
> Participant directly rolls $10,000 to Roth IRA; it is pro-rata $9,300 is Roth; $700 earnings
> How is it reported on Form 1099-R?

Form 1099-R
Box 1: $10,000 (Gross Distribution)
Box 2a: $0 (Taxable Amount)
Box 4: $0 (Federal Income tax withholding)
Box 5: $9,300 (Roth basis)
Box 7: Code H
Left of Box 10: 2007 (First year of 5-year clock)

FACT SET THREE: Designated ROTH Partial Distribution to Participant

> Distributable event: In-service distribution
> Over age 59 1/2 participant made designated Roth deferrals since 2008 and has no other money in the plan
> Participant has $10,000 balance
> $9,400 of designated Roth contributions, $600 of earnings
> Participant withdraws $5,000, it is pro-rata: $4,700 is Roth; $300 earnings
How is it reported on Form 1099-R?

Form 1099-R
Box 1: $5,000 (Gross Distribution)
Box 2a: $300 (Taxable Amount)
Box 4: $60 (20% mandatory withholding)
Box 5: $4,700 (Roth basis)
Box 7: Code B
Left of Box 10: 2008 (First year of 5-year clock)

For more information and more examples, click here for information and/or to register for our Roth Conversion and Portability eSeminar.