1099-R, roth coversion, and 8606 form

[rg60614]

Hi,

I contributed $12000 to my traditional IRA in January 2020. $6000 for 2019 and $6000 for 2020. I then did a Roth conversion for the entire $12000 a few days later. Based on that I got a 1099-R from my brokerage for $12000.

When I'm filling out my tax forms in turbotax, it is taking the $12k from 1099-R and asking me if I converted it to Roth. I say yes and put in the entire amount for the conversion. It then tells me that I'm over the limit for roth ira contribution and will have to pay a penalty even though it's a conversion and not a direct contribution. I'm assuming that is happening because only $6k for  the $12k is for 2020 and it's seeing that I contributed $6k to my traditional IRA in 2020 but converted $12k to roth, going over by $6k.

Any ideas on what I should do?

[DanaB27]

You will have to enter $6,000 contribution on your 2019 return  (please see How do I amend a 2019 return in TurboTax?) and $6,000 o your 2020 return. Also, the conversion from traditional to Roth IRA will be only entered in the 1099-R section.

To enter the nondeductible contribution to the traditional IRA (you will do that on your 2019 return and your 2020 return):

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” ( yes, for your 2020 return)
9. If you had a basis in the Traditional IRA before then enter the amount. (Enter the $6,000 basis from the 2019 contribution for your 2020 tax return)
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

On your 2020 tax return only enter the 1099-R distribution/conversion: 

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Click "Continue" and enter the information from your 1099-R
5. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
6. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
7. On the "Your 1099-R Entries" screen click "continue"
8. Answer "yes" to "Any nondeductible Contribution to your IRA?"
9. Answer the questions about the basis and value