Backdoor Roth IRA conversion for 2018 & 2019 converted in 2019

Forum|Forum|6 years ago
January 31, 2020
33 replies
116 views

In Jan 2019 I made two non deductible contributions to Traditional IRA; one for 2018 =$6500 and 2nd for $2019 = $7000 (I am 60 years + ). The next day I then transferred $13,500 to Roth IRA for backdoor conversion.

On my 2018 return, In TurboTax I reported $6,500 as non-deductible Traditional IRA contribution. I did not deal with Roth Conversion on my 2018 return as I did not have a 1099-R.

Now I am filing 2019 return. I have a 1099R showing distribution of $13,500 (the 1099-R has box 2b checked (Taxable amount not determined); Distribution code is 7 and IRA/SEP/Simple box is checked.

I am unable to figure out how to enter this in TurboTax - no matter what I do, I get excess tax liability. Can some one guide me how to enter 2018 as well 2019 Roth conversion in my 2019 return?

Thank you

TurboTax Home & Biz Windows

Best answer by macuser_22

Expert Reviewed

This 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 If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself.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, SEP & SIMPLE IRA and ended up with a zero amount in ALL Traditional, SEP & SIMPLE IRA accounts will this Roth conversion not be taxable.

First you must enter your Traditional IRA contributions (if there were 2019 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 2019. (Usually zero unless you also made a 2018 or earlier non-deductible contribution. If you do have prior year basis then enter the last filed 8606 line 14 value.).

Enter the 2019 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.

[If you had any other Traditional IRA at the end of 2019, then the nondeductible "basis" must be pro-rated over the current distribution and the total IRA value and only a portion of the Roth conversion will be non taxable and part will be taxable, with the remaining non-deductible basis carrying forward for future distributions. You can never only withdrew the nondeductible basis as long as the IRA exists and has a value more than 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 4a of them 1040 form and a zero taxable amount on line 4b if you did it right.

Also see this TurboTax FAQ:
https://ttlc.intuit.com/questions/4350747-how-do-i-enter-a-backdoor-roth-ira-conversion

macuser_22

Answer

Alumni - Champ

Expert Reviewed

This 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, SEP & SIMPLE IRA and ended up with a zero amount in ALL Traditional, SEP & SIMPLE IRA accounts will this Roth conversion not be taxable.

First you must enter your Traditional IRA contributions (if there were 2019 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 2019. (Usually zero unless you also made a 2018 or earlier non-deductible contribution. If you do have prior year basis then enter the last filed 8606 line 14 value.).

Enter the 2019 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.

[If you had any other Traditional IRA at the end of 2019, then the nondeductible "basis" must be pro-rated over the current distribution and the total IRA value and only a portion of the Roth conversion will be non taxable and part will be taxable, with the remaining non-deductible basis carrying forward for future distributions. You can never only withdrew the nondeductible basis as long as the IRA exists and has a value more than 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 4a of them 1040 form and a zero taxable amount on line 4b if you did it right.

Also see this TurboTax FAQ:
https://ttlc.intuit.com/questions/4350747-how-do-i-enter-a-backdoor-roth-ira-conversion

**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.**

V

vikasahuja

Level 2

What if the Balance as per Form 5498 is not zero? In my case, I converted $633 prior to 12/31/2019 and rest of $5367 was converted on Jan 1, 2020. The total amount contributed was $6000 for 2019 as non deductible IRA from post tax dollars. How do I make Turbo Tax keep my $633 contribution to IRA (and then conversion) as non taxable? If I make my balance at the end of the year to $0 when asked by Turbo Tax, it becomes non taxable otherwise, it becomes taxable.

macuser_22

Alumni - Champ

@vikasahuja wrote:

What if the Balance as per Form 5498 is not zero? In my case, I converted $633 prior to 12/31/2019 and rest of $5367 was converted on Jan 1, 2020. The total amount contributed was $6000 for 2019 as non deductible IRA from post tax dollars. How do I make Turbo Tax keep my $633 contribution to IRA (and then conversion) as non taxable? If I make my balance at the end of the year to $0 when asked by Turbo Tax, it becomes non taxable otherwise, it becomes taxable.

The 5498 is for information only. You are asking about two different tax years.

For the 2019 conversion, you should have a 2019 1099-R reporting that. If you had non-deductible "basis" prior to 2020 then that can be applied to reduce the 2019 tax. The year end value is for ALL Traditional IRA accounts that you had then and you get that from the 2019 year end statements from the financial institutions holding the IRA accounts.

Any amount converted in 2020 will be reported next year on a 2020 1099-R and you report it the same way, using the 2020 year end value. Any new non-deductible contribution made *in* 2020 (whether it was for 2020 or 2019) would be applied to the 2020 conversion.

**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.**