Back Door Roth Conversion appearing a taxable income

[mliedtka]

I cant figure out how to get turbo tax to fill out my form 8606 correct. If I made non deductible contributions in 2024 and rolled them over in 2024 it shouldnt appear as taxable income. The questions only seem to focus on previous year's IRA basis. Please help!

[MindyB]

There are 2 steps to a backdoor conversion performed in 2024- First enter the nondeductible contribution in the deductions and credits, then enter the conversion from 1099-R.  If you enter the 1099-R first, there won't be any basis from the 2024 contribution that can be recognized since it wasn't entered yet.

Here are the steps to report a backdoor Roth in TurboTax Online, from How do I enter a backdoor Roth IRA conversion?:

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

1. Go to Deductions & Credits
2. On the Your tax break screen, locate and select the Retirement and Investments section, then select Start or Revisit next to Traditional IRA and Roth IRA.
3. On the Traditional IRA and Roth IRA screen, check the Traditional IRA box and select Continue.
4. On the Is This a Repayment of a Retirement Distribution? screen, select No.
5. On the Tell Us How Much You Contributed screen, enter the amount contributed and select Continue.
6. On the Did You Change Your Mind? screen, select No, then answer the questions on the following screens.
7. When you reach the Choose Not to Deduct IRA Contributions screen:
8. Select Yes, make part of my IRA contribution nondeductible.
9. Enter the amount you contributed.
10. If none of your contributions can be deducted, you won't see the option to make part of it nondeductible. Instead, you will see the message Income Too High To Deduct an IRA Contribution, and the full amount of your contribution will automatically be nondeductible.
11. Select Continue.
12. On the Your IRA Deduction Summary screen, review the info and select Continue.

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

1. Go to Wages & Income.
2. On the Your income and expenses screen, locate and select the Retirement Plans and Social Security section, then select Start or Revisit next to IRA, 401(k), Pension Plan Withdrawals (1099-R).
3. Answer Yes to Did you get a 1099-R in 2024?, then Continue.

• If you land on the screen Review your 1099-R info select Add Another 1099-R.

1. Select how you want to enter your 1099-R (import or choose Change how I enter my form to either upload it or type it in yourself) and follow the instructions.
2. Answer the questions on the following screens, until you reach Tell us if you moved the money through a rollover or conversion.
3. Select I converted some or all of it to a Roth IRA and Continue.
4. Next, choose Yes, all of this money was converted to a Roth IRA and Continue..
5. Continue answering questions until you come to the screen Review your 1099-R info."

[Dave805]

Same question as the first post but how does one recover from this if the retirement section for income was done before the retirement section for deductible?  I am  using the desktop version and it imported a 1099-R from Fidelity automatically.  

I deleted the 1099-R in the income section but still I am only prompted for non-deductible contributions for 2023, not 2024 in the deductible section.  It doesn't follow the example you gave. 

[AnnetteB6]

If you made a non-deductible contribution to your Traditional IRA in 2024 and then later converted it, you have to enter that non-deductible contribution explicitly.  You do not just enter the prior basis.  

Go to Deductions and Credits > Retirement and Investments > Traditional and Roth IRA Contributions and select Start or Update to get started.  

Use the steps in the following TurboTax help article if you get stuck and need more explicit instructions:

How do I enter a backdoor Roth IRA conversion?

@Dave805 
 

[Opus 17]

Do you have any tax-deductible funds in any traditional IRA?  (Not just the account that you used for the Roth conversion, but any IRA.  All IRAs are considered to be one IRA for tax purposes.  401k and other plans also don't count for this question.)

[Dave805]

No other IRA existed before starting one with post tax money and then the next day rolling it into a Roth.

I figured it out though.  The problem was two fold

- importing my Fidelity data resulted in a 1099-R getting counted in the Income section.  To do the rollover with post tax money, one has to do the Deductible section first - which isn't how the software flow normally runs.  I had to go back to the income section and delete the 1099-R that was imported, then go to the deductibles retirement section.

-In the deductibles retirement sections,  I made too much $$ in 2024 so I was never asked to enter non-deductible amounts for 2024.  The only screen I would get is 'enter non-deductible for tax year 2023' and that's it.  That  kept me confused.