1099-R for a Roth Conversion: Pro-Rata Rule and Form 8606

When you convert money from a Traditional, SEP, or SIMPLE IRA to a Roth IRA, your custodian sends you Form 1099-R, and the correct 1099-R Roth conversion reporting happens in two steps: you calculate the taxable portion on Form 8606 using the IRS pro-rata rule, then you carry the gross and taxable figures to Lines 4a and 4b of Form 1040. The 1099-R itself rarely tells you the taxable amount, because your custodian usually doesn’t know your IRA basis.

What Each Box on Your 1099-R Means

Your IRA custodian issues a 1099-R for every conversion. Four entries matter for reporting.

Box 1, gross distribution, shows the total dollar amount that moved from the Traditional IRA to the Roth IRA. Convert $50,000 and Box 1 reads $50,000. This is the full transfer, not necessarily the taxable amount.¹

Box 2a, taxable amount, is where the confusion usually starts. For Traditional IRA distributions, the custodian generally isn’t required to compute the taxable amount. If you’ve ever made nondeductible contributions to any Traditional IRA, the custodian almost certainly doesn’t know your total basis, so Box 2a is often left blank or filled with zero.²

Box 2b has two checkboxes: “Taxable amount not determined” and “Total distribution.” When the custodian can’t figure the taxable amount, one or both get checked. That’s the form telling you and the IRS that the number still needs to be calculated on your return.¹

Box 7 identifies the transaction. For a Roth conversion, the custodian enters Code 2 if you were under 59½ at the time, or Code 7 if you were 59½ or older. The IRA/SEP/SIMPLE checkbox in Box 7 is also marked.³

One warning about codes. Code R is not for conversions. Code R is used for recharacterizations of IRA contributions. If your 1099-R shows Code R for what you know was a conversion, ask your custodian for a corrected form before you file.

Calculating the Taxable Amount With the Pro-Rata Rule

If every dollar in your Traditional IRA came from deductible contributions and tax-deferred earnings, the whole conversion is taxable and the arithmetic ends there. The work begins when you also have nondeductible contributions sitting anywhere in your Traditional, SEP, or SIMPLE IRAs. In that case, Internal Revenue Code Section 408(d)(2) requires the pro-rata rule, which treats every dollar you convert as a proportional mix of taxable and non-taxable money.

You cannot convert only the after-tax dollars. The IRS treats all of your non-Roth IRA balances as one combined pool, no matter how many separate accounts you hold.

Worked Example

Say you hold a Traditional IRA worth $100,000 on December 31 of the conversion year. Of that, $20,000 is basis from nondeductible contributions you’ve tracked over the years. The other $80,000 is deductible contributions and earnings. You convert $50,000 to a Roth IRA.

Divide total basis by the total value of all your non-Roth IRAs:

$20,000 ÷ $100,000 = 20%

Apply that ratio to what you converted:

20% × $50,000 = $10,000 non-taxable

The remaining $40,000 is the taxable portion, reported as ordinary income. Your remaining basis drops from $20,000 to $10,000 and carries forward to next year’s Form 8606.

Why the December 31 Balance Matters

The total value of all your non-Roth IRAs on December 31 of the conversion year drives the pro-rata math, even if you actually converted back in January. If you contribute to a Traditional IRA or roll a 401(k) into a Traditional IRA later in the same year, that money enlarges the denominator and changes the ratio. This is the trap that catches many people running a backdoor Roth. There’s no income limit on doing a Roth conversion itself, but pre-tax IRA balances will make part of it taxable.

Filling Out Form 8606

Form 8606, Nondeductible IRAs, is where you formally calculate the taxable and non-taxable portions of the conversion. File it any year you convert Traditional IRA funds to a Roth IRA or take a distribution when you have basis in your IRAs.⁴

Part I: Basis and the Pro-Rata Calculation

Part I establishes your total basis and runs the pro-rata math. Using the numbers above:

Line 1: Any new nondeductible contributions for the current tax year. Enter zero if none.
Line 2: Basis carried forward from last year’s Form 8606, Line 14. Here, $20,000.
Line 3: Total basis (Line 1 plus Line 2).
Line 6: Total value of all Traditional, SEP, and SIMPLE IRAs on December 31 of the conversion year, plus any outstanding rollovers. Here, $100,000.
Line 8: Net amount converted to a Roth IRA. Here, $50,000.

The remaining lines in Part I work through the division to determine what fraction of your distributions and conversions is non-taxable. Line 14 gives your remaining basis after the current year’s non-taxable portion is applied. In the example, $20,000 minus $10,000 leaves $10,000 to carry forward.⁵

Part II: The Taxable Conversion Amount

Part II isolates the conversion and splits it:

Line 16: Total conversion amount, $50,000.
Line 17: Non-taxable portion from Part I, $10,000.
Line 18: Taxable portion, Line 16 minus Line 17. Here, $40,000.

That $40,000 is what gets taxed as ordinary income.⁵

Reporting the Conversion on Form 1040

On Form 1040, the conversion lands on the IRA distributions lines. Line 4a takes the total distribution amount from Box 1 of the 1099-R, the full $50,000. Line 4b takes the taxable amount from Form 8606, Line 18, which is $40,000.⁵

If Box 2a of your 1099-R shows a taxable amount but you have basis that the custodian didn’t account for, you still use your Form 8606 result on Line 4b. The 1099-R figure is a starting point, not the final word. The IRS matches the gross distribution on Line 4a to Box 1 of the 1099-R; the taxable figure on Line 4b is expected to come from your own calculation when basis is involved.

Conversion Timing

A Roth conversion must be completed by December 31 to count for that tax year. Unlike regular IRA contributions, which can be made up to the April filing deadline for the prior year, conversions follow a strict calendar-year rule. A conversion executed on January 2, 2027, counts as 2027 income no matter what year you meant it for. There’s no way to backdate.

If You’re Converting a SIMPLE IRA

One boundary worth knowing before you file. Converting from a SIMPLE IRA carries an extra timing rule. During the first two years of participation in your employer’s SIMPLE IRA plan, moving the money to a Roth IRA (or any non-SIMPLE IRA) is treated as a taxable distribution and hit with a 25% penalty rather than the usual 10%. After the two-year period ends, normal conversion rules apply.⁶

The two-year clock starts on the date your employer first deposited a contribution to your SIMPLE IRA, not the date you opened the account. Check with your plan administrator if you aren’t sure when that was.

1
Internal Revenue Service. Instructions for Forms 1099-R and 5498
2
Internal Revenue Service. IRS Form 1099-R
3
Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
4
Internal Revenue Service. About Form 8606, Nondeductible IRAs
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Internal Revenue Service. Instructions for Form 8606 (2025)
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Internal Revenue Service. SIMPLE IRA Withdrawal and Transfer Rules