backdoor coversion showing tax to be paid in turbotax

[mpatel]

Hi, I contributed $6,500 to my Traditional IRA for the 2023 tax year on April 10, 2024, and $7,000 for the 2024 tax year on the same day. Since my income is higher than allowed for deduction, I did not take any deduction for these contributions. Then, on April 11, 2024, I did a backdoor Roth IRA conversion of the full $13,500. Why is TurboTax showing that I owe taxes?

[MindyB]

It sounds like you are being taxed because you may not have separately entered the contributions.  Even though they aren't deductible, they need to be entered.  For the 2023 tax return, you should have prepared a Form 8606 to report the $6,500 contribution - check your tax return to verify you did.  If not, you can do so now.  There may be a $50 late fee assessed unless you have cause.  See: About Form 8606, Nondeductible IRAs to get a pdf form and fill it out, if needed.

Here's how to enter the $6,500 from 2023:

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  Revisit next to IRA, 401(k), Pension Plan Withdrawals (1099-R).
3. Choose the 1099-R and continue through the interview questions, until you reach Enter Prior Year Roth IRA Contributions. Here, enter $6,500

Here's how to enter the 2024 $7,000 contribution in TurboTax Online:

1. Navigate to Federal > Deductions & Credits > Retirement and Investments>  Traditional IRA and Roth IRA > Revisit
2. Continue through interview again, when you are asked Is This a Repayment of a Retirement Distribution? screen, select No.
3. On the Tell Us How Much You Contributed screen, enter $7,000 and select Continue.
4. On the Did You Change Your Mind? screen, select No, then answer the questions on the following screens.
5. Since 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.

Here are the full instructions to report a Backdoor Roth: How do I enter a backdoor Roth IRA conversion?

[mpatel]

Thanks for your prompt reply. I am not able to see screen for Roth IRA contribution prior to 2024. Do i need to do anything differently? 

[mpatel]

Also, i have From 8606 from last year which shows $6500 contribution for 2023. I am using windows desktop version for TurboTax premier. 

[AnnetteB6]

First, make sure that you did enter the $7000 non-deductible Traditional IRA contribution into your 2024 return.  

You do not need to enter anything for prior year Roth IRA contributions since you are not taking a distribution from a Roth IRA.  However, when you are converting your Traditional IRA to a Roth IRA, you are taking a distribution from your Traditional IRA.  If you only have one Traditional IRA account that contained only after-tax (non-deductible) contributions, then the conversion to the Roth IRA should be non-taxable unless there were earnings added to the account in the time between the contributions and the conversion.

But, if you have other Traditional IRA accounts that contain pre-tax money, then the pro-rata rule will apply and the conversion to a Roth IRA would be partially taxable.  If that is not the case for you and you only have the one Traditional IRA account with only after-tax funds, then please review the following TurboTax help article to be sure that all the steps have been followed when entering the backdoor Roth conversion.  Pay close attention to the last section If your conversion contains contributions made in 2024 for 2023 to be sure that the basis of the Traditional IRA has been entered.

How do I enter a backdoor Roth IRA conversion?
 

@mpatel