Retirement tax questions

You are correct that the gains on the traditional IRA are taxed as ordinary income during the conversion.

As you know, a backdoor Roth IRA allows you to get around income limits by converting a Traditional IRA into a Roth IRA.

Contributing directly to a Roth IRA is restricted if your income is beyond certain limits, but there are no income limits for conversions.

Doing a backdoor Roth conversion is a two step process.

Step 1:  Enter the Non-Deductible Contribution to a Traditional IRA

1. Open your return if it’s not already open.
2. Inside TurboTax, search for ira contributionsand select the Jump to link in the search results.
3. Select Traditional IRA on the Traditional IRA and Roth IRA screen and Continue.
4. Answer Yes to Did you Contribute To a Traditional IRA?
5. Answer No to Is This a Repayment of a Retirement Distribution?
6. On the Tell Us How Much You Contributed screen, enter the amount contributed and continue.
7. Answer No on the Did You Change Your Mind?
8. Depending on your situation, answer the remaining questions.

Step 2:  Enter the Conversion from a Traditional IRA to a Roth IRA

1. Inside TurboTax, search for 1099-rand select the Jump to link in the search results.
2. Answer Yes on the Your 1099-R screen and continue.
   • If you land on the Your 1099-R Entries screen, select Add Another 1099-R.
3. Select how you want to enter your 1099-R (import or type it in yourself) and follow the instructions.
4. Answer No to Did You Inherit the IRA from (payer)?
5. Answer I moved the money to another retirement account (or returned it to the same retirement account) on the What Did You Do With The Money From (payer)?
6. Next, choose I converted all of this money to a Roth IRA account.
7. Continue answering questions until you come to the Your 1099-R Entries screen.

To check the results of your backdoor Roth IRA conversion, see your Form 1040:

1. On the left side of your screen, select Tax Tools, then Tools.
2. Under Tool Center, select View Tax Summary.
3. On the left side of your screen, select Preview my 1040.
   • Your backdoor Roth IRA amount should be listed on 1040 Postcard, Line 4  as IRA distributions.
   • Taxable amount should be zero unless you had earnings between the time you contributed to your Traditional IRA and the time your converted it to Roth IRA, then the earnings would be taxable.
   • Schedule 1, Line 32 IRA deduction, should be blank.
4. Select Back on the left side of your screen to return to where you left off in TurboTax.