pher
Level 3

When I filled out nondeductible traditional IRA contributions (for a Backdoor Roth), why did TurboTax calculate my federal refund going significantly down?

In 2022, I made a nondeductible contribution to my Traditional IRA and then converted that exact same amount (no growth) to my Roth IRA. I put this into TurboTax and watched as my refund immediately tanked by thousands of dollars.  I'm so confused why this happened, since the contribution shouldn't be taxable (regardless of whether it's deductible).

 

My Traditional IRA (I only have one) had $0 in it at the end of 2021. In the Wages & Income section, TurboTax asked, "Let us know if [name] made and kept track of any nondeductible contributions to [name]'s Traditional IRA from 2022 or prior years." I said Yes (because I was contributing in prior years, even if I always converted it all into a Roth IRA). It then asked my basis as of end of 2021, and I input $0 (because I had converted all amounts into the Roth IRA before the end of each year). For the total value of all traditional IRAs as of end of 2022., I also put $0.

 

Why would TurboTax calculate this as reducing my refund? The only thing I can think of: My 1099-R does include the whole contribution under "taxable amount" (line 2a) but it also has the "taxable amount not determined" checkbox checked (line 2b), and I entered that into TurboTax properly, so it shouldn't actually be using that as part of the calculation...?

 

Should I have not entered this into my Wages  & Income section? Or maybe I was supposed to do it there, but something will come later in Deductions?