Backdoor Roth Conversion in Turbo / unclear @ ending IRA values

Forum|Forum|2 years ago
March 18, 2024
1 reply
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Hello,

I am entering my Backdoor Roth conversion in TurboTax for 2 IRAs —> Roth IRAs (each $6500) this year for myself and my husband. Usually, the ending value of all IRAs on Dec 31st of the prior year is ZERO on my Forms 5498, but this year - I have 2 nonzero values ($3.08 and $3.88). So White Coat Investor says this should be ZERO (which it has been for past 4 years of doing this). But Turbo says a nonzero number on this 5498 form means that my conversion will have the pro-rate rule applied to it. So, are these ending values really insignificant and I should just enter ZERO when prompted….or should I enter the $3 and then figure out how it affects the conversion?

Thanks everyone! TaxDocMomma

DavidD66

Level 15

It sounds like the last time you did a Back Door Roth conversion your traditional IRA earned a little bit of interest - which is normal now that interest rates are greater than zero. Since the amounts are reported on the Form 5498 I would enter them. You are correct that the amounts are insignificant. It will result in 0.046% of your conversion to be taxable - or $3.00. You can verify on your account statement whether there is a balance other than zero in the account at year end. If so, the next time you do a back door Roth, be sure to have your advisor convert the entire balance, including the $3.08 or whatever it is at the time.

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TaxDocMamaAuthor

Level 2

Thanks for your help. Now does this mean my Basis is now not zero anymore? My 8606 forms from prior years all have 0 as line 2 for basis…but now I’m confused since basis is the total amount in IRAs. Turbo says to NOT confuse basis with the ending fair market value on forms 5498. Not sure how to proceed here.

DavidD66

Level 15

Your basis will be $3.00 in your IRA and $4.00 husband's after reporting your conversions. I suggest you should proceed the same way you have in prior years. If you do a backdoor Roth conversion for 2024 convert the entire balance in your account at the time of the conversion. Your basis will revert back to zero.

[Edited 03-19-2024 5:30 PM EDT]

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