After-tax 401k rollover contribution to Traditional IRA considered as excess contribution in TurboTax

[kaieravwsaldfh]

Background, in 2022 I:

1. Rolled my after tax dollar from after-tax 401k to my Traditional IRA. (I intended to rollover to my Roth IRA account directly, but Fidelity and I made a mistake together here, and we ended up rolling over to Traditional IRA instead.)
2. Then I rolled over the money from Traditional IRA to Roth IRA immediately.

When I report the Traditional IRA contribution from #1 in TurboTax, it warns me that I made excess contribution to my Traditional IRA and it's subject to 6$ penalty, even though I already told it all the amount were converted to a Roth IRA account. Could you help to suggest how should I fix this situation in TurboTax? Or is it safe for me to ignore this warning?

[tagteam]

Contact Support tomorrow if you don't get an answer here by then.

How do I contact TurboTax? (intuit.com)

[dmertz]

This is not a regular traditional IRA contribution.  Remove the related entry that you made under Deductions & Credits.  Enter the rollover only by entering the Form 1099-R that reports the distribution from the 401(k), nowhere else, and answer the questions that TurboTax asks for this 1099-R.

Separately, enter the Form 1099-R that reports the distribution from the traditional IRA and indicate that you converted the entire distribution to Roth.  TurboTax will prepare Form 8606 to calculate the taxable amount.

The Form 1099-R from the 401(k) is the one without the IRA/SEP/SIMPLE box marked.  The Form 1099-R from the traditional IRA is the one that has the IRA/SEP/SIMPLE box marked.

[kaieravwsaldfh]

(Removed)

[kaieravwsaldfh]

@dmertz I already entered the Form 1099-R that reports the distribution from the traditional IRA and indicate that I converted the entire distribution to Roth. However, the problem is that if I don't also enter this under "Deductions & Credits", TurboTax thinks this money is taxable, but it's not because the money being converted is after-tax.

[VolvoGirl]

You enter the after tax contributions when you enter the 1099R.  After you enter the 1099R it should ask if you made any non deductible contributions.  You only enter brand new contributions in Deductions.  Go back and delete the 1099R and try again.  

[kaieravwsaldfh]

@VolvoGirl 

> You enter the after tax contributions when you enter the 1099R.

I don't think it offers such an option to do so. When entering the 1099R for distribution from Traditional IRA:
1. All the amount in 1099R from Box 1 are marked as taxable in Box 2a.
    - Total amount is $16,000
     - $10,000 was rolled over from after tax 401k
     - $6,000 was directly contribution
2.1099R  Box 2b has "Taxable amount not determined" checked
3. In TurboTax Wage&Income section, I entered:
   a. All amount were converted to a Roth IRA account
   b. I made and tracked nondeductible contributions to IRA
   c. Total Basis as of December 31, 2021 is $0
   d. Value of Traditional IRA on December 31, 2022 is $0
4. In TurboTax Deductions & Credits section, for "Total 2022 traditional IRA contributions"
  a. If I enter $16,000 (as mentioned in the original post), TurboTax thinks I'm over contributing as the contribution limit is $6,000.
   b. If I enter $6,000 (as @dmertz suggested), the remaining $10,000 is considered as taxable, but they are not as they are after-tax dollars.

 > Go back and delete the 1099R and try again.

I tried re-entering the 1099R's multiple times, unfortunately it does not help.

[dmertz · Accepted solution]

@kaieravwsaldfh , you mentioned some Form 1099-R details, but not enough to determine which Form 1099-R you are referring to.  Certainly the Form 1099R that has the IRA/SEP/SIMPLE box marked should have box 1 equal to box 2a and the IRA SEP/SIMPLE box marked.  But what about the Form 1099-R that does not have this box marked.  That Form 1099-R should have $16,000 in box 1, the pre-tax amount in box 2a and the after-tax amount in box 5 with no marking of box 2b Taxable amount not determined.  What are the dollar amounts shown on this Form 1099-R that has the IRA/SEP/SIMPLE box unmarked?

I never suggested entering $6,000 as a regular traditional IRA contribution.  I said that you should  be entering nothing under Deductions and Credits with regard to these transactions.

[dmertz · Accepted solution]

I think I understand why your tax return does not reflect the correct taxable amount.  When you roll over after-tax funds from a 401(k) to a traditional IRA, in TurboTax you must click the Continue button on the page that lists the Forms 1099-R that you have entered, answer Yes when asked if you made and tracked nondeductible contributions to your IRA (item 3b on your list of actions), click the EasyGuide button on the next page, continue and mark the box to indicate that you transferred money from your employer's plan in 2022 or a previous year, then enter the after-tax amount that was rolled over to the traditional IRA.  Finally explain the rollover from the 401(k) of the after-tax amount.

[kaieravwsaldfh]

@dmertz Yes this is it! Thank you so much for the help!