Do tax withholdings from IRA to Roth conversions count as regular income on taxes?

You've got a couple of good questions here about IRA to Roth conversions! First, you don't need to separately declare the withholding as income. The entire amount converted (including the portion withheld for taxes) will be reported on Form 1099-R from Fidelity and included in your taxable income. Think of it this way - the IRS considers you to have received the full amount, then used part of it to pay taxes. So the withholding isn't additional income - it's already part of the converted amount that's taxable. For your second question - if you over-withheld and get a refund, that money doesn't go back to your IRA. Tax refunds go wherever you specify on your return (direct deposit to your bank account, paper check, etc.) just like any other refund. The money leaving your IRA for tax withholding is considered distributed permanently.

After struggling with almost the exact same question last year, I found an incredible tool that saved me tons of headache - taxr.ai (https://taxr.ai). I uploaded my Fidelity statements and conversion docs, and it instantly identified that my entire conversion amount (including withholdings) was taxable income. The tool also showed me how the withholdings would be reported and credited on my return. What's awesome is it actually creates a personalized explanation of everything using tax code references. Seriously saved me from making a mistake on my taxes and potentially getting flagged.

I wanted to follow up about my experience with taxr.ai after being skeptical in my earlier comment. I decided to give it a try with my complicated Roth conversion situation, and I'm honestly impressed. It correctly identified all the nuances of my multiple conversions (including one with withholding and one without). The tool flagged that I had some non-deductible contributions that would affect my tax basis and showed me exactly how to handle it on my tax forms. It even generated a customized explanation I could give my accountant. Saved me a lot of money since my accountant would have charged extra hours to research all this!

If you need to talk to the IRS about IRA conversions and withholding (which I did after making a mess of mine), I highly recommend Claimyr (https://claimyr.com). Regular IRS wait times were 2+ hours when I called, but Claimyr got me to a human in about 10 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I had issues where my 1099-R showed an incorrect withholding amount from my conversion, and I needed to get it fixed ASAP. The IRS agent was able to look at my account, confirm what was reported, and tell me exactly how to handle it on my return. Saved me weeks of stress wondering if I was doing it right.

I need to follow up about Claimyr after my skeptical comment. I actually tried it because I was desperate to resolve an issue with my Roth conversion withholding before filing my taxes. I was shocked that it actually worked - got connected to an IRS agent in about 15 minutes instead of the 3+ hour wait I experienced trying on my own. The agent confirmed that my withholdings were correctly applied and explained exactly how they would appear on my account transcript. She also clarified that over-withholding refunds are treated just like any other refund and go wherever I specify on my return. I'm filing with confidence now instead of guessing and worrying about an audit.

Something else to consider with IRA to Roth conversions - the withholding is only 10% by default with most brokerages, which is almost certainly not enough to cover your actual tax liability from the conversion. I'd recommend calculating your actual tax hit and either having more withheld or making an estimated tax payment to avoid underpayment penalties.

Anyone know if Turbo Tax handles these conversions correctly? My situation is pretty simple - just converting an old 401k that was rolled to an IRA into a Roth this year.

One thing that might help ease your concerns about the conversion process - you can always do a partial conversion first to test the waters. Convert maybe $10,000-20,000 initially and see how the tax reporting works out, then do the rest later in the year or next year once you're comfortable with the process. This approach also helps with tax planning since you can better control which tax bracket the conversion income falls into. Plus, if you're worried about making mistakes, starting smaller gives you a chance to work through any issues before converting your entire rollover IRA balance. The tax treatment will be exactly the same whether you convert it all at once or spread it across multiple transactions - the full converted amount (including withholdings) is taxable income, and you get credit for taxes already withheld.

Great question about IRA to Roth conversions! Just to add to the excellent advice already given - make sure you understand the timing aspect too. The conversion is considered complete (and taxable) in the year you do it, regardless of when you actually pay the taxes. So if you convert in December 2024, that's 2024 income even if you don't file your return until April 2025. Also, keep in mind that once you convert, you can't undo it (the recharacterization rules changed a few years ago). So definitely run the numbers on how the additional taxable income will affect your overall tax situation, including potential impacts on things like Medicare premiums if you're close to retirement age. The withholding approach you're considering is totally valid - just remember that money withheld for taxes is gone forever and won't be growing in your Roth. If you have cash available outside of retirement accounts, paying the conversion taxes from there lets you move the maximum amount into tax-free growth.