@sonzoil wrote:
I had taken a traditional IRA distribution in 2021, and then took that money and converted it to a Roth IRA. Upon using the software a question was asked If I had made any nondeductible IRA contributions in previous years? I wanted to know the reason for the question, and If I should go back through all my 1040s in past years to check?
If you made non-deductible IRA contributions in the past, then a portion of any current or future distribution (or conversion) would be tax-free since it was already taxed. You would have a form 8606 as part of your tax return for every year you made a non-deductible IRA. Your most recent form 8606 will also have the total of any non-deductible contributions, although the IRS recommends you save all the 8606s generated from non-deductible contributions, in case you need them to prove that part of your current and future withdrawals are tax-free.
If you never made non-deductible contributions, then all your current withdrawals or conversions are taxable.
