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I recently converted a 401(k) to a Roth IRA. I prepared the return back in 2013 with TurboTax. TurboTax mentions that I now have to pay a 6% penalty each year going forward. Does this make sense?
ANSWER
Expert Barbara Blacklidge's Answer:
It would make sense if you made excess contributions for the year to your Roth IRA. Inasmuch as you are converting from a 401K to a Roth, the 6% excise tax imposed for excess contributions to a Roth IRA does not apply to you.
References: IRS Publication 590 & Internal Revenue Code Section 4973(a)
The BIDaWIZ Team's Answer:
We agree with the above. We would also add that TurboTax is treating the transaction as a contribution as opposed to a rollover. Thus, the reason for the apparent 6% annual penalty. Did you actually rollover the 401(K) to a Roth or did you withdraw it and then contribute it to the Roth IRA? The latter seems likely based on the response from TurboTax. However, it's also possible you did a rollover and didn't follow proper steps on TurboTax or the program had limitations during the interview process.
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