If I converted 2K from a trad IRA into a Roth is it really taxed as income?

Question

I mean I really did not received the money, so is there a box on the 1040 tax form that I add this or just to my adjusted gross?

Answer 1

The distribution from the traditional IRA is taxable even though you converted it to a Roth IRA directly and did not take possession of the money.

You will receive two Forms 1099R showing the distribution from the traditional IRA and the contribution to the Roth IRA. Enter this information into your tax software exactly as shown on the forms.

If you do the return manually, for the taxable distribution of $2,000 from the traditional IRA, enter $2,000 on Line 15a of the 1040. This will add the taxable distribution to your adjusted gross income.

To record the conversion to the Roth, fill out and attach From 8606 Nondeductible IRA, Part II, to your return.

Answer 2

Yes, it is taxed as income.

While it might hurt now, in the long run you end up better. The reason behind paying taxes now is because your traditional IRA contributions are PRE tax (meaning you have not paid taxes on your contributions). If you were to continue the traditional IRA everything (contributions and interest) will be taxed when you withdraw money from your traditional IRA

However, with a Roth IRA the contributions are POST tax, and when you withdraw money from your Roth account everything (contributions and interest) will be tax free.

The main difference here is the interest becomes tax free and therefore you must pay taxes on your entire Traditional IRA when you convert to a Roth IRA.

It would be considered a IRA distribution. Any tax software can walk you through this easily.