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Get your taxes done using TurboTax
@ZaneRayClancy wrote:
OK thanks. Let's see if I can figure this out with the TurboTax for Mac. If not I may have to switch to TurboTax online and start all over again which would be a lot of work.
In the Federal Taxes / Deductions & Credits section / Tell Us How Much You Contributed screen, I entered my $7,000 contribution, and I entered that all $7,000 was contributed between 1/1/21 and 5/17/21. The next screen asks "Tell Us How Much You Transferred. How much of the $7,000 you contributed to the traditional IRA for 2020 did you switch, or "recharacterize" (this does not include conversions or rollovers), to a Roth IRA? Amount Switched from a Traditional IRA Contribution To a Roth IRA Contribution:"
I did transfer the $7,000 (non-deductible contribution to the traditional IRA) to a Roth IRA a day later. Do I enter $7000 or 0? The question confuses me. I can't tell if my transfer is a recharacterization or a conversion. It says enter the amount if it is a recharacterization, but don't include conversions. An earlier response to my original question said it was a conversion, but I read elsewhere that a conversion is when you transfer money contributed in a prior year to a Roth, but if the transfer is money contributed in the same year is a recharacterization.
Also, do I have to file a separate form (I think 8606) since my original contribution was non-deductible? Can I just add that somehow with Turbotax? I don't think turbotax has me file that last year when I did the same thing in early 2020 for the 2019 tax year.
If you made a non-deductible contribution *for* 2019 *in* 2020 then that must be reported on your 2019 (or amended) 2019 tax return - not in 2020. That will produce a 2019 8606 form with the contribution on lines 1, 3 and 14. You will need that line 14 amount to report the 2020 1099-R for the conversion.
If you also made a 2020 non-deductible Traditional contribution you enter that the same was that will produce a 2020 8606 with that contribution on line 1.
Here is the entire backdoor Roth procedure:
| The "Backdoor Roth" does not exist in tax law. It is a procedure used by some to take advantage of a quirk in tax law that allows making a non-deductible contribution to a Traditional IRA when one cannot contribute to a Roth IRA, and the immediately converting the Traditional IRA to a Roth IRA, thereby getting the money into the Roth via "backdoor" tax free. That "procedure" can only work of all these requirements are met: 1) No Traditional IRA account whatsoever can exist (that includes any SEP or SIMPLE IRA accounts) at the start. If existing IRA's contain any before-tax money or earnings then it will be partly taxable. 2) The Tradition IRA contributions must be reported on a 8606 form as non-deductible. 3) The conversion to a ROTH must be shortly after the contribution to avoid taxable gains. 4) The entire Traditional IRA value must be zero that the end of the year of conversion. Otherwise the conversion will be partly taxable. First you must enter your Traditional IRA contributions (if there were 2020 contributions). IRA contribution Federal Taxes, Deductions & Credits, I’ll choose what I work on (if that screen comes up),, Retirement & Investments, Traditional & Roth IRA contribution. Be SURE to answer the follow up that the are choosing to make this contribution NON-DEDUCTIBLE - if that screen comes up. (DO NOT say that you moved (recharacterized) the money to a Roth) – this is a conversion, not a recharactorazition. Then enter the 1099-R that shows the distribution. Federal Taxes, Wages & Income I’ll choose what I work on (if that screen comes up),, Retirement Plans & Social Security, IRA, 401(k), Pension Plan Withdrawals (1099-R). Answer the follow-up questions answer the question that you moved the money to another retirement. The screen will open up with choices of where it was moved. Choose you converted it to Roth IRA. When asked if you have made any non-deductible contributions say " "yes" if you did then enter the non-deductible contributions made for tax years before 2020. (Usually zero unless you also made a 2019 or earlier non-deductible contribution. If you do have prior year basis then enter the last filed 8606 line 14 value.). Enter the 2020 year end value of your Traditional IRA a "0" (zero) - if it is in fact zero - this tax free Roth conversion will not work if it is not zero. [If you had any other Traditional IRA at the end of 2020, then the nondeductible "basis" must be pro-rated over the current distribution and the total IRA value and only a portion of the Roth conversion will be non taxable and part will be taxable, with the remaining non-deductible basis carrying forward for future distributions. You can never only withdrew the nondeductible basis as long as the IRA exists and has a value more than zero.] The non-deductible amount of your contribution will be subtracted from the taxable amount of the conversion on then 8606 form and enter on line 4a of them 1040 form and a zero taxable amount on line 4b if you did it right. Also see this TurboTax FAQ: https://ttlc.intuit.com/questions/4350747-how-do-i-enter-a-backdoor-roth-ira-conversion |
