A so-called “back-door Roth” method ONLY works if you have NO OTHER Traditional IRA accounts. If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself. Only if you started with NO Traditional IRA and ended up with a zero amount in ALL Traditional IRA accounts will this Roth conversion not be taxable.
In your case the $5,500 basis must be prorated over the entire value of all Traditional IRA accounts as of Dec 31, 2016 which was probably $16,500. About $1,375 of the bases would reduce the tax on the $5,500 Roth conversion leaving $4,125 as basis in the account to be prorated against future distributions. You can *never* only withdraw the basis - it is always prorated over the entire value of all existing IRA's. The taxable amount of the $5,500 Roth conversion would also be about $4,125 since only $1,375 would be tax free.
First you must enter your Traditional IRA contributions (if there were 2016 contributions).
IRA contribution
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),,
Retirement & Investments,
Traditional & Roth IRA contribution.
Be SURE to answer the follow up that the are choosing to make this contribution NON-DEDUCTIBLE - if that screen comes up. (DO NOT say that you moved (recharacterized) the money to a Roth) – this is a conversion, not a recharactorazition.
Then enter the 1099-R that shows the distribution.
Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),,
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).
Answer the follow-up questions answer the question that you moved the money to another retirement. The screen will open up with choices of where it was moved. Choose you converted it to Roth IRA.
When asked if you have made any non-deductible contributions say " "yes" if you did then enter the non-deductible contributions made for tax years before 2016. (Usually zero unless you also made a 2015 or earlier non-deductible contribution).
Enter the 2016 year end value of your Traditional IRA a "0" (zero) - if it is in fact zero - this tax free Roth conversion will not work if it is not zero.
The non-deductible amount of your contribution will be subtracted from the taxable amount of the conversion on then 8606 form and enter on line 15a of them 1040 form and a zero taxable amount on line 15b if you did it right.
Also see this website that has some screenshots of the procedure
http://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
