Q. How to use turbotax to complete irs form 8606 for a partial conversion of some Rollover IRA $ to a Roth IRA?
A. Entre the 1099-R, that you received for the conversion, and carefully follow the interview.
You will be asked if you converted it. You will also be asked if you made any prior non-deductible contributions and the value of all your IRAs, at the end of the year. Note: you include all your IRAs, for this info, not just the rollover IRA.
For more on how this works, read the generic description, below the line.
___________________________________________________________________________________________
The non-deductible contributions cannot be converted in isolation from any other existing traditional and rollover IRA(s). It's best explained by example. Let's say you have a $10,000 balance in all your existing traditional IRAs, including rollovers, and that balance consist of $3,000 in deductible contributions, $2,000 in previous non-deductible contributions and $5,000 in earnings (interest, dividends & capital gains). Your basis, in all your IRAs, is $2,000. This year you convert $5000 to a Roth. Only 20% of the $5000 conversion ($1000) will be tax free . TurboTax will divide that $2,000 basis by the $10,000 balance to arrive at the 20% tax free ratio. $4,000 of the conversion will be taxable. This is the way the IRS requires it to be done. The calculations will be shown on form 8606.
