1099-Q for roth conversion

[dillrob]

Does anyone know what the proper 1099-Q codes should be for a 529-to-roth conversion where the funds are directly transferred from the 529 plan to the 529 plan's beneficiary's Roth IRA?
I am reviewing the recently issued 1099-Q for a 529-to-roth conversion and the distribution amount (as well as the basis and gain) is correct, line 4 box is checked (which appears to be correct), line 6 box is checked (which appears to be wrong since the recipient is the same as the 529 plan beneficiary) and the line 6 distribution code is 1.
I'd appreciate input from anyone with experience with the correct 1099-Q designations for such a conversion and whether the above appears to be correct. Thanks.

[Eagle33]

Last I heard was that the IRS has not yet provided any specific guidance regarding 529 to Roth IRA contributions. Its a Roth contribution, not a conversion.

[Alan S.]

Does anyone know what the proper 1099-Q codes should be for a 529-to-roth conversion where the funds are directly transferred from the 529 plan to the 529 plan's beneficiary's Roth IRA?
I am reviewing the recently issued 1099-Q for a 529-to-roth conversion and the distribution amount (as well as the basis and gain) is correct, line 4 box is checked (which appears to be correct), line 6 box is checked (which appears to be wrong since the recipient is the same as the 529 plan beneficiary) and the line 6 distribution code is 1.
I'd appreciate input from anyone with experience with the correct 1099-Q designations for such a conversion and whether the above appears to be correct. Thanks.

The IRS has not issued 1099Q instructions relating to 529 to Roth transfers, although they have directed the Roth custodian to report the rollover as a Roth IRA contribution on Form 5498. This could be troublesome, because a 529 transfer to a Roth IRA moves a pro rated amount of 529 contributions and gains to the Roth IRA as if they were Roth contributions and gains. When the Roth custodian reports the total transfer as a regular Roth IRA contribution on Form 5498, the Roth owner should not be able to treat that entire amount as Roth IRA basis, because it includes gains. But the IRS was more pre occupied with making sure that the transfer used up the Roth contribution space.

There is no reason for the Roth custodian to care how much is contribution and gain because they don't track gains, only basis. This could be a quandary for the IRS and the reason why 1099Q Inst do not yet address these transfers.

My guess is that if a 1099Q is eventually required, it will only include checking the trustee to trustee transfer box for a Roth transfer, as this is not a distribution and no part of it is taxable. In the meantime, unless the 529 custodian has received non public guidance from the IRS, taking a stab at an accurate 1099Q could have consequences.