DanaB27
Expert Alumni

Retirement tax questions

Yes, you are correct when you had earnings because you delayed the conversion then part of your conversion will not be taxable. Also, if your traditional IRA was not empty (had pre-tax funds) before starting the backdoor procedure then each distribution/conversion will be partly taxable. You cannot convert only the nontaxable part if you have both pre-tax and after-tax funds in the traditional IRA.

 

To clarify, you made the nondeductible contribution in 2020 and converted the amount in 2021?

 

If yes, then you will enter the nondeductible contribution on your 2020 tax return with the steps below. This will give you a basis (nondeductible contribution) on line 14 of Form 8606. This basis you will enter in your 2021 tax return.

 

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top right and type “IRA contributions”
  3. Click on “Jump to IRA contributions"
  4. Select “traditional IRA
  5. Answer “No” to “Is This a Repayment of a Retirement Distribution?
  6. Enter the amount you contributed
  7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
  8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contributions before this tax year.
  9. If you had a basis in the Traditional IRA before then enter the amount.
  10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible).

 

 

 

On your 2021 tax return you will enter the 1099-R for the conversion:

 

  1. Click on "Search" on the top right and type “1099-R”
  2. Click on “Jump to 1099-R”
  3. Click "Continue" and enter the information from your 1099-R
  4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA
  5. On the "Your 1099-R Entries" screen click "continue"
  6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
  7. Answer the questions about the basis from line 14 of your 2020 Form 8606 and  the value of all traditional, SEP, and SIMPLE IRAs

 

@mixuala

 

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