First, some context.
I have been making backdoor Roth IRA contributions (converting nondeductible/after-tax traditional IRA contributions) since 2017.
Every year, including during tax years 2020 and 2021, I have made one single maximum-amount-allowed traditional IRA contribution, and then converted all funds in the traditional IRA to Roth (again, backdoor Roth), leaving $0 in the traditional IRA after each conversion.
For tax year 2019, I contributed the maximum allowed amount of $6,000 to my traditional IRA, giving it a balance of $6,000 after that contribution. The account went down in value before I was able to convert it, and my 2019 1099-R shows a gross distribution from the traditional IRA of $5,972.10 due to the conversion. The 2019 Form 8606 I filed, as generated by TurboTax, had the following information:
- Box 1 - nondeductible contributions: $6,000
- Box 2 - total basis in traditional IRAs: $0
- Box 3 - box 1 plus box 2: $6,000
- Box 5 - $6,000
- Box 13 - $5,972* (with an asterisk), "this is the nontaxable portion of all your distributions", which looks right since that's what was distributed from the traditional IRA, $28 less than what I contributed
- Box 14 - box 3 minus box 13: $28 - "This is your total basis in traditional IRAs for 2019 and earlier years"
Now, my question.
While trying to enter this information into TurboTax for my 2020 taxes, TurboTax showed me the following prompt:
Let's Find Your IRA Basis
Remember, most people with traditional IRAs do not make or track nondeductible contributions that give a basis other than zero.
If [name] did make any nondeductible contributions, look at your most recent Form 8606. Find the box called total basis and enter the number from that box below. If you never filed a Form 8606, just enter 0 (zero.) (Learn More)
[Name]'s Total Basis as of December 31, 2019 [input box]
If I enter $28 in that box, which was Box 14 from my 2019 Form 8606 as explained above, TurboTax shows the following:
"The IRA basis we transferred from 2019 is different from the basis entered. Include a brief explanation of why your IRA basis changed with your return."
My main question is this:
Why is TurboTax saying the basis it transferred from 2019 is different than what I entered ($28)? TurboTax is seemingly expecting me to enter $0 in that box instead of $28 (though it won't show explicitly show me the value that it transferred from 2019), even though it seemingly previously calculated that that number should be $28 for 2019.
In the end, this seemingly boils down to the distributions being lower than the contribution was, even though I converted the entire account.
A few other questions:
- In that box, should I type the $0 it seemingly expects, or the $28 with an explanation, and if the latter, what would that explanation be? ("Value from Box 14 on my 2019 Form 8606?")
- Based on this information, was the basis on my 2019 Form 8606 actually calculated correctly by TurboTax? I ask because TurboTax's "learn more" link for IRA basis says the following: "You will only have a basis in an IRA if some part of these contributions was not deductible. If all contributions were deducted in full, the basis is zero." All of my contributions were exclusively nondeductible contributions.