Get your taxes done using TurboTax

You shouldn't be penalized on a backdoor Roth IRA conversion. In order to do this you need to make a non-deductible contribution to your traditional IRA and then roll it over to a Roth IRA. You need to enter the Form 1099-R rollover to the Roth IRA properly, as well as designate the contribution to your traditional IRA as a non-deductible contribution. Also, you will be asked in the program to enter balances from your IRA's in prior and current year. You need to pay particular attention to those questions so that the calculations will be accurate in the program.

For the backdoor IRA, enter a traditional IRA contribution in the Deductions and Credits section of TurboTax, then Retirements and Investments, then Traditional and Roth IRA Contributions. Indicate that your traditional IRA contribution is non-deductible when asked in the program:

When you enter the 1099-R form in TurboTax, you need to first indicate that you moved the money to another retirement account and that you did a combination of rolling over, converting or cashing out the money. Then, enter the amount converted to a ROTH IRA. Later on you need to indicate that you tracked non-deductible contributions to your IRA. Then you will be asked for your beginning and ending basis in the traditional IRA.