If you did it how you described, there should not be a penalty. You made a nondeductible contribution to a traditional IRA then converted it to a Roth IRA. Since you did not contribute directly to the Roth, you should not be subject to the penalty. To enter this in TurboTax:
To enter a contribution to an IRA, please use the following steps:
- In the Deductions & Credits section of your Federal return, scroll down to Retirement and Investments. Click Show More and click Revisit/Start next to Traditional and Roth IRA Contributions.
- If you converted to a Roth IRA, your original contribution was to a Traditional IRA. You then should have received a 1099-R for the conversion from a traditional IRA to a Roth IRA if you both made the contribution and the conversion in 2021. For a proper back-door Roth, you will want to select Traditional IRA.
- Select No to Is This a Repayment of a Retirement Distribution?
- Enter your contribution amount, making sure to put it in the appropriate box if you contributed in 2022.
- Select No to Did you change your mind? For more details on the differences between conversions and re-characterizations, you can click on the TurboTax help article.
- Navigate through the rest of the questions. This should be a Nondeductible contribution.
If you also converted the traditional IRA to a Roth in 2021, you should have gotten a 1099-R from the traditional IRA, which would be entered like this:
- Search for 1099-R and select the Jump to link in the search results.
- Continue through the screens to import or enter your 1099-R form.
- The IRA/SEP/SIMPLE box is checked.
- When asked What did you do with the money? select I did a combination of rolling over, converting, or cashing out the money. Enter the money converted to a Roth and Continue.
- After a few more screens, it will ask Any Nondeductible Contributions to Your IRA? If you had a basis in your traditional IRA account, you may enter it here as well as the starting and ending values of the IRA so TurboTax can determine the taxable amount of the conversion.
For screenshots of the process, see this TurboTax article.
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