2024 Backdoor Roth Conversion impacting fed+state refunds

[morph23]

I'm putting in backdoor Roth conversions for the 2024 tax year using 1099-Rs I've received. I've done this in previous years without impacting refund amounts. This year, I can't figure out what I'm doing wrong -- I've followed the help article "How do I enter a backdoor Roth IRA conversion?" step-by-step.

Two 1099-Rs, one for me and one for my wife.

- $7000 contributed to Traditional IRA for each ($14000 total)

- Both converted fully to Roth IRAs with $0 basis and $0 in Traditional at year-end, marked as non-deductible

- $14 taxable (Total converted was $14014 due to interest in Traditional accounts prior to conversion)

When all is said and done (first inputting in Deductions where I selected Traditional for both my wife and me, and then inputting into Income for the conversions. I've tried it in the other order as well), the Federal refund decreases by $6 and the state (NJ) refund decreases by $1258. Note in the Deductions flow I've only checked Traditional as this is what is mentioned in the help article, though I've also tried by checking Roth in addition where I then answer that there are $0 in Roth contributions, which has the same end result.

As the contributions were made with taxed money and are non-deductible, with $0 basis, I'm not sure why there is any impact at all for either refund.

[fanfare]

"I've done this in previous years without impacting refund amounts."

A backdoor contribution is done by converting aTrad IRA  contribution to a Roth IRA

Step 1 enter the Trad IRA amount of $7,000 and make sure you have elected "Non-deductible".

" and then inputting into Income for the distributions. "

There is no income if you do a conversion of non-deductible basis in a Traditional IRA to a Roth IRA

Since you converted an extra $14, the Form(s) 8606 should result in a taxable amount of $14.

@morph23 

[morph23]

@fanfare 

Here's the TurboTax help article for entering a Backdoor Roth Conversion.

It needs to be entered in both Wages & Income in Pension Plan Withdrawals (1099-R) for the conversion, and in Deductions for the non-deductible contribution.

And correct, only $14 should be taxable. When I look at the 1040 Preview per the instructions in the article (to double check), the Line 4a values are correct (showing just $14 taxable), as well as Schedule 1 Line 20, but for some reason it is still impacting both refunds.

[fanfare]

" as well as Schedule 1 Line 20, "

what is the amount shown on this line?

@morph23 

[morph23]

@fanfare It was blank, matching expectations from the help article.

[fanfare]

Evidently you have entered the information correctly.

If your "refund/amount you owe" is unexpected, it is due to other unrelated entries on your tax return.

---
Always print a copy of your completed tax return for your records, and review it carefully before e-Filing.
You will need it if you are audited by the IRS, to contact the IRS, or to amend if a TurboTax update changes your return or for any other reason,

AND, to find your AGI next year.

[morph23]

@fanfare Thanks, and yes it seems it is being entered correctly based on the preview, but I haven't been able to pinpoint why entering the conversion w/ 1099-Rs is impacting both refunds to such a degree (or, at all). Inputting non-deductible contribution in Deductions has no impact on the refunds, only after entered in the Income/Wages section for the conversions is when the refunds drop. Are there any obvious scenarios where this would be valid? I haven't seen this behavior in over 5 years of doing backdoor conversions.

[fanfare]

you probably have to wait for the final  TurboTax updates that always come later.