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Roth IRA Excess Contribution to Traditional IRA to Backdoor Roth IRA
I have a "new to me" tax situation for 2023 that I could use some assistance with how to enter in TurboTax. The short version is that last year (for 2022 tax year) we fell into the phase out income range for Roth IRA contributions. We removed all excess (with some losses), and backdoored some back into a Roth IRA, and some into a taxable investment account. In addition to that, I also have an old Traditional IRA (deductible) from a former employer. Now I'm trying to figure out how to enter all of this for our 2023 tax return.
The detailed version...
2021 (and prior):
- Our combined income was always lower. My employer offered a SIMPLE IRA which I contributed to.
- Both my wife and I would max out our Roth IRA's.
- SIMPLE IRA balance as of 12/31/2021: $59,249.
2022:
- My employer was acquired. I had a couple months of contributing to the SIMPLE IRA, and then I started contributing to a Roth 401k instead.
- In August 2022, my SIMPLE IRA was converted to a Traditional IRA (at the same custodian where I have my Roth IRA).
- My wife and I continued to max out our Roth IRA's.
- Traditional IRA (former SIMPLE IRA) balance as of 12/31/2022: $50,502.
2023:
- At the start of the tax season (for the 2022 return), I soon realized our income had placed us into the phase out income range for being able to contribute to IRA's.
- I spoke to my custodian and filed a return of excess + losses, and had that moved into a taxable investment. I left what I could in my Roth IRA, and did nothing else. My Roth IRA excess + losses was $4,340.
- My wife spoke to her custodian and filed a return of excess + losses, had that moved to a new Traditional IRA (nondeductible), and then converted (backdoor) back into her Roth IRA. Her Roth IRA excess + losses was $4,324. Her conversion amount was $4,518.
- For the rest of 2023, I paused contributions to my Roth IRA, while my wife's financial advisor suggested she continue to make contributions.
- At the end of the year, I contributed $500 to my Roth IRA, she contributed the max $6,500 to her Roth IRA.
- Traditional IRA (former SIMPLE IRA) balance as of 12/31/2023: $61,041.
2024:
- Much like last year, we are still in the phase out range for contributing to Roth IRA's.
- My wife is currently filing a return of excess + gains (while 2022 saw losses, I imagine for 2023 we'll see gains on excess). Her Roth IRA excess amount is $5,030.
- For tax filing purposes, I know I need to enter details for the backdoor conversion that occurred, but I'm not sure how/where to do that to ensure it's properly handling the mix of deductible and nondeductible Traditional IRA's (I know about the pro rata formula, which is what I want to make sure is accounted for).
- We each received a 1099-R for our Roth IRA's. They both have distribution codes J and P. They both have 2a taxable amount of $0. When I enter these forms, nothing changes with our tax return refund amount.
- My wife also has a 1099-R on her new Traditional IRA with distribution code 2. This one does have a 2a taxable amount ($4,518, same as 1 gross distribution), and all 3 check boxes are checked (2b taxable amount not determined, total distribution, IRA/SEP/SIMPLE IRA). When I added this as-is, it dropped our refund significantly (reduced by $1,011, though I can't determine how it's coming up with this number). I feel like I'm missing something here.
- Additionally, I have read that I should enter a fake 1099-R form on the 2023 tax return to avoid needing to file an amended 2023 tax return next year. From what I understand, this is to account for the Roth IRA return of excess gains that are occurring this year when correcting the 2023 Roth IRA contributions, but are counted as 2023 gains. How would I go about doing this?
For anyone else who has been in this situation before, is there anything else I'm missing? Any other details you need from me? I would appreciate any assistance you can offer. Thank you!