Back Door Roth Conversion

[Wyldaisy]

Hello,

I am doing my 2022 taxes and have a question regarding my 2022 back door Roth conversion.  My 2022 contribution and conversion occurred in calendar 2022 ($7,000).  When going through the Turbo Tax prompts, Turbo Tax auto-populates the question regarding the basis of my 2021 Traditional IRA as $0.  This makes sense because per my returns below, my 2021 return had $0 populated on Line 14 Form 8606.

However, if I look at my Form 8606 from my 2020 tax return Form 8606 had line 14 populated with $7,000.

Is this because the 2020 contribution and conversion was made in calendar 2021, whereas the 2021 contribution and conversion occurred in calendar 2021?   Therefore, since the 2020 conversion didn’t happen until 2021, there was basis in 2020?  And then because the 2021 (and 2020) conversion occurred in 2021, there was no basis for traditional IRA as of 2021?

Using this logic, should I assume that because I did my contribution and conversion for tax year 2022 in calendar 2022, when I do my 2023 taxes, turbo tax will pull over a basis of $0 for my 2022 traditional IRA.

To see the whole picture – let’s say I had contributed and converted my calendar 2022 Roth in January of 2023 – would Turbo Tax in that case pull over a 2022 basis of $7,000 because the conversion did not happen until 2023?

I am also answering the question “Yes, I made and tracked nondeductible contributions to my IRA”.  I do not have any traditional IRAs.

Sorry if this is a duplicate post.

Original Transaction:

• March 2021 (all on same day)
• $7,000 contribution made to traditional IRA – tax year 2020
• $7,000 contribution made to traditional IRA – tax year 2021
• $7,000 conversion to Roth IRA – tax year 2020
• $7,000 conversion to Roth IRA – tax year 2021

2020 Tax Return:

• Form 1040
• Line 4 (a)   $0/blank
• Line 4 (b)   $0/blank

• Form 8606
• Line 1     $7,000
• Line 3     $7,000
• Line 14   $7,000

2021 Tax Return:

• Form 1040
• Line 4 (a)    $14,000
• Line 4 (b)    $0

• Form 8606
• Line 1    $7,000
• Line 2    $7,000
• Line 3    $14,000
• Line 5    $14,000
• Line 13    $14,000
• Line 16    $14,000
• Line 17    $14,000
• Line 18    $0

[DanaB27]

Yes, on your 2020 Form 8606, you had a basis on line 14 since you made the contribution for 2020 in 2021 and therefore the conversion didn't happen until 2021.

 Yes, you converted the 2020 and 2021 contributions in 2021 (everything) and therefore your basis for 2021 on line 14 was $0.

Yes, if you made a contribution for 2022 and converted the amount in 2022 (traditional IRA was empty) then your basis on line 14 of your 2022 Form 8606 will be $0.

Yes, if you made a contribution for 2022 in 2023 and converted the amount in 2023 then you will have the contribution amount as the basis on line 14 of your 2022 Form 8606. TurboTax will carry this over to your 2023 tax return. You can verify it when TurboTax asks “Any Nondeductible Contributions to Your IRA? and answer "Yes". On the next screen, you are able to enter your basis from prior years (if it wasn't carried over automatically).

To enter the nondeductible contribution to the traditional IRA:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
10. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the 1099-R conversion: 

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. 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"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
12. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs