8606 Non Deductible IRA to Roth Conversion

RT50 · ‎February 22, 2021

I converted 8606 Non-deductible IRA to Roth IRA in 2020. In the IRA information worksheet, Part I, Traditional IRA Basis and Value, line 1 and 2 are correctly tracked by TurboTax. Line 3, Basis carryover as of 12/31/2020 is only about 44% of the amount of line 2, YE value on 12/31/2020. Shouldn't line 3 equals line 2, since no conversion or withdraw had been done previously. Taxes were paid for line 2 amount and should be the cost basis to calculate taxable amount (i.e. investment earnings) in the conversion. This caused the overstatement of IRA distribution taxable amount by 56%. Please help. Thanks.

MarilynG1 · ‎February 22, 2021

Per @macuser_22:

"This so-called “back-door Roth” method ONLY works if you have NO OTHER Traditional IRA accounts. If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself. Only if you started with NO Traditional, SEP & SIMPLE IRA and ended up with a zero amount in ALL Traditional, SEP & SIMPLE IRA accounts will this Roth conversion not be taxable."

Since we can't see your tax return in this forum, click this link for more info on Non-Deductible IRA to Roth Conversion that may help you.

You can also request a Line by Line Review if you need more help.

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RT50 · ‎February 22, 2021

This is the only IRA account I have.

macuser_22 · ‎February 22, 2021

@RT50 wrote:

I converted 8606 Non-deductible IRA to Roth IRA in 2020. In the IRA information worksheet, Part I, Traditional IRA Basis and Value, line 1 and 2 are correctly tracked by TurboTax. Line 3, Basis carryover as of 12/31/2020 is only about 44% of the amount of line 2, YE value on 12/31/2020. Shouldn't line 3 equals line 2, since no conversion or withdraw had been done previously. Taxes were paid for line 2 amount and should be the cost basis to calculate taxable amount (i.e. investment earnings) in the conversion. This caused the overstatement of IRA distribution taxable amount by 56%. Please help. Thanks.

Those calculations are done on the 8606 form. The carry-forward basis will be on the 8606 line 14.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

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RT50 · ‎February 22, 2021

Fixed, thanks for your help.

8606 Non Deductible IRA to Roth Conversion

Retirement tax questions

Retirement tax questions

Retirement tax questions

Retirement tax questions