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Get your taxes done using TurboTax
Thanks for your response. Here is what I think accounts for Turbotax calculating that a substantial amount of my $7000 non-deductible IRA is taxable when converted to my Roth IRA. The total basis of my traditional IRA on 12/31/21 was zero. In February 2022 I made $7000 non-deductible contribution to my traditional IRA after which I made "backdoor" conversion to my Roth IRA. But when I retired in May, 2022 I had good sized balances in my workplace 401K. Some of the 401K money was after-tax deferrals and Roth deferrals. Those amounts I rolled over to my previously established Roth IRA. But the largest portion of the 401K was pre-tax deferrals and earnings. That amount was rolled over into a new "rollover" IRA. Form 8606 asks for total balance of all IRAs on 12/31/21 which was zero. Form 8606 also asks for total balance of all traditional IRAs on 12/31/22 which was a large amount because that amount includes the 401K money rolled over to the new rollover IRA. (At the time of the rollovers from the 401K to the rollover IRA I took my total RMD required for 2022.)
So when I look at worksheet in IRS Publication 590B, the amount of my backdoor conversion of $7000 that is non-taxable includes the total 12/31/22 balance of the "rollover IRA" leading to the result that quite a bit less than the total of the converted $7000 is non-taxable.
My question: Is it proper for the non-taxable amount of the converted $7000 calculation to include in the denominator the amount rolled over from my 401K to my new rollover IRA in 2022? Obviously, this gives a different taxable amount from prior years when I only had a traditional IRA that had balance of zero on 12/31 of each year.
Thank you again.