Back Door Roth from Trad IRA

[Scooter741]

We did a back door conversion from a traditional IRA to a Roth IRA during 2024.  I've followed the instructions for recording this in Turbo Tax (both the amounts reported under income for the distribution that was converted and in reporting contributions made to the traditional IRA), but Turbo Tax is coming up with a $2,000 taxable amount and I'm just not sure how.  

The conversion amount is higher than the contribution amount due to how our financial planner booked the contributions (amounts from 2024 were put to 2023 on their system by the looks of it), which impacts the 1099 that we received.  That amount wouldn't have put us over 2023 contributions in that year (we did a conversion then as well but didn't have this same issue).  

Is Turbo Tax calculating this correctly and we have to pay on this difference between what was contributed and converted?  

Any insights would be appreciated!

[fanfare]

If the financial advisor booked a contribution for 2023 then you must amend to file a 2023 Form 8606 for any non-deductible amount.

If you deducted $2,000 on 2023 return, a tax on $2,000 now will cancel out. the effect is the same.

@Scooter741 

[DanaB27]

As fanfare said if you made nondeductible contributions for 2023 then this should have been reported on your 2023 tax return and you should have the 2023 Form 8606 with a basis on line 14. This basis will be entered on your 2024 tax return.  Please see How do I amend my federal tax return for a prior year? if you didn't report this IRA contribution for 2023 on your 2023 tax return.

To enter the nondeductible contribution to the traditional IRA:

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” if you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2023 Form 8606 line 14 (if you had a basis in the prior year)
10. 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 Form 1099-R conversion: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" screen click "Continue"
6. Answer "Yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2023 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs