Backdoor Roth Conversion for 2019 and 2020 - all completed in 2020

[randybrandt1]

I missed contributing to my IRA in 2019, so in the early part of 2020 I made a 6k prior year(2019) contribution and 6k same year(2020) contribution to the same traditional IRA. I then used the backdoor process to convert the total 12k from my traditional to a Roth IRA. My 5498 shows a 12k distribution for 2020.  All contributions were non-deductible. The traditional IRA had a zero balance at the beginning of 2020. 

I've entered this data into TurboTax Desktop version, but I can't seem to figure out where to enter the 6k for the prior year(2019) contribution. All of the interview questions seem to skip the part where I added 6k in non-deductible basis for 2019, so I am getting taxed on that amount of the conversion. What am I missing?

[macuser_22]

You enter the 2019 8606 form line 14 amount when it asks for prior year non-deductible contributions.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2020.

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

NOTE: If there is an * next to line 15 then 6-14 will be blank and the calculations will be on the "Taxable IRA Distributions worksheet instead.

[randybrandt1]

You mention - "when it asks for prior year non deductible contributions". I will assume you are referring to the screen titled "Let's Find Your IRA Basis" where it mentions looking at your Form 8606.

This is a bit confusing because I don't have a Form 8606 from a previous year (as i didn't contribute anything until 2020).  Then the question asks "Total Basis as of December 31, 2019" - technically speaking my cost basis was zero as of that date, as I didn't make a contribution until 2020. But maybe from a tax year perspective it still counts regardless of the exact timing?

Regardless, I did add 6K here to account for 2019 basis, and this did negate my tax burden for this activity. 

I appreciate the assistance!

[macuser_22 · Accepted solution]

---

@randybrandt1 wrote:

You mention - "when it asks for prior year non deductible contributions". I will assume you are referring to the screen titled "Let's Find Your IRA Basis" where it mentions looking at your Form 8606.

This is a bit confusing because I don't have a Form 8606 from a previous year (as i didn't contribute anything until 2020).  Then the question asks "Total Basis as of December 31, 2019" - technically speaking my cost basis was zero as of that date, as I didn't make a contribution until 2020. But maybe from a tax year perspective it still counts regardless of the exact timing?

Regardless, I did add 6K here to account for 2019 basis, and this did negate my tax burden for this activity. 

I appreciate the assistance!

---

You said that you made a 2019 contribution *in* 2020.    Since it was a contribution *for* 2019, it can only be reported on a 2019 8606 form line 1, 3 & 14.   If you failed to enter it on your 2019 tax return, you must amend  2019 and add it, then mail to the IRS.    Without the 2019 8606 the non-deductible 2019 basis will be lost and you cannot apply it to the 2020 conversion.

When you do that and enter but the 2020 non-deductible contribution in the 2020 IRA contribution interview and the 2019 8606 line 14 as stated above, then on your 2020 8606 the 2020 contribution will be on line 1, the 2019 contribution opn line 2 and the total on line 3 to offset the tax on the 2020 conversion.

[randybrandt1]

OK, note to self and anyone who happens across this post - - AVOID PRIOR YEAR CONTRIBUTIONS TO A TRAD IF YOU PLAN TO BACKDOOR TO ROTH.

Thanks for the clarification and follow up MacUser! I get it now.

I will say, and this is no knock on you.. As u don't make the rules.. But this is bonkers! From my perspective if the IRS is going to allow for prior year contributions they should account for it in their process for the same tax year. I'm not exactly excited about amending 2019 just to have a number populate in 2020. Sorry, venting, THX! 

[macuser_22]

---

@randybrandt1 wrote:

OK, note to self and anyone who happens across this post - - AVOID PRIOR YEAR CONTRIBUTIONS TO A TRAD IF YOU PLAN TO BACKDOOR TO ROTH.

Thanks for the clarification and follow up MacUser! I get it now.

I will say, and this is no knock on you.. As u don't make the rules.. But this is bonkers! From my perspective if the IRS is going to allow for prior year contributions they should account for it in their process for the same tax year. I'm not exactly excited about amending 2019 just to have a number populate in 2020. Sorry, venting, THX! 

---

It is not the IRS - it is Congress that makes the tax law.

The tax law specifically says that a contribution made for a prior year before the filing due date for the prior year is deemed to have been made on Dec 31 of the prior year.    Therefore it is not a 2020 contribution, it is a 2019 contribution legally made in 2019 so it can only be reported on a 2019 tax return.