Distributions from a Roth IRA are generally non-taxable. However, when a taxpayer converts basis from a Traditional IRA to a Roth IRA, the amount is taxable over a certain period after the conversion.
To enter a Roth IRA distribution with code J that is subject to the additional 10% tax, as calculated on the Form 5329:
- Navigate to Screen 13.1, Pensions, IRAs
- Enter the Name of payer
- Open the Distribution code #1 drop-down menu
- Select distribution code J from the drop-down list
- Mark the checkbox for IRA/SEP/SIMPLE
- Enter the Gross Distribution amount
- Navigate to Screen 24, Adjustments to Income
- Locate the Roth IRA section
- Enter in the Basis in Roth IRA conversions as of 12/31/19
- Navigate to Screen 41, Retirement Plan Taxes
- Select Early Roth Distributions (5329) from the left navigation panel
- Enter the Year of distribution or conversion
- Enter the Taxable amount of conversion.
Note: Should the Roth IRA already have a basis when the prior year conversion took place, enter the amount of that basis in Screen 41.2, Early Roth Distributions in the field Basis in conversion.
The above entries will prompt Lacerte to generate Form 8606 and Form 5239.