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Help: Roth IRA conversion penalty
I followed all the steps but was surprised I need to pay penalty annually for the backdoor Roth IRA conversion. Below are my steps.
- Sign in to your TurboTax account
- Open your return if it’s not already open
- Select Federal from the menu, then Deductions & Credits
- Locate the Retirement and Investments section and select Show more
- Select Start or Revisit next to Traditional and Roth IRA Contributions
- Check the Traditional IRA box and select Continue
- Answer Yes to the question, Did you Contribute To a Traditional IRA?
- Answer No to the question, Is This a Repayment of a Retirement Distribution?
- On the screen, Tell Us How Much You Contributed, enter the amount (6000) contributed and select Continue
- Answer Yes on the screen Did You Change Your Mind?,.
After that, I put "Your IRA Explanation Statement", No for "Any Excess IRA Contributions Before 2024?", "Yes" to "Any Nondeductible Contributions to Haifeng's IRA?" and 0 for Total Basis of 2023-12-31
What surprised me is that the money I put to Roth is considered excess contribution and need to pay penalty of 6% each year if the money is not returned to traditional IRA. Yes, my AGI is slightly above the 240000 limit, but I thought this is what backdoor Roth IRA is for.
Thank you for your help.
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March 8, 2025
8:54 AM