Backdoor Roth conversion not working as described in article

[jman42]

Hi, I am trying to enter a backdoor conversion from traditional IRA to Roth IRA for 2022. I found an article https://ttlc.intuit.com/turbotax-support/en-us/help-article/retirement-benefits/enter-backdoor-roth-...

This article says to enter the amount I withdrew as a Traditional IRA contribution on the Tell Us How Much You Contributed screen (Step 1, item 8), then enter the 1099-R for the distribution from the traditional IRA (Step 2). When I do this, TT says that I have an excess IRA contribution. If I try to enter it as a Roth contribution (not in the article), I get an excess Roth contribution error. When I check this on the forms, 1040 line 4B says that I have some odd calculated amount for the taxable amount of the IRA distribution. The article also describes screens that I do not see.

The only way I could get this to look reasonably correct is to enter zero for the traditional IRA contribution, zero for the Roth contribution, and enter the converted amount on the screens after the 1099-R data is entered. Then I don't get the errors regarding excess contributions and the taxable amount on line 4B looks correct. I think the article is confusing and perhaps incorrect.

I would like to know if I am doing this correctly and if the instructions in the article are correct. If not, what is the correct procedure to follow?

[jman42]

More information. I am not sure if a "backdoor" conversion is what I need, since I'm not trying to contribute more than allowed to a Roth by contributing first to a traditional and then converting it. There does not seem to be an article explaining this. The "What are traditional IRA to Roth conversions" article https://ttlc.intuit.com/turbotax-support/en-us/help-article/retirement-benefits/traditional-ira-roth... doesn't go into enough detail here. I would like to see how this can be entered on Form 8606, as the conversion I entered is not showing up there.

[fanfare]

For a true backdoor Roth contribution, you must:

• start with a zero balance in your traditional IRA before beginning this adventure
•  end with a zero balance in your Traditional IRA by converting it all to Roth

@jman42 

[jman42]

Hi, thanks for the answer. After more reflection, I think that a backdoor Roth conversion is not what I need, as I am doing a conversion from an existing traditional IRA to a Roth. I just wish there had been a help article posted that explained this difference better.

[fanfare]

a Roth conversion is taxable.

it will be 100% taxable unless you have a prior years basis or a non-deductible contribution for the year of conversion. you basis fraction is prorated

@jman42 

[JuanTumani]

I think I'm trying to do the pretty much same thing as what Jman42 describes: entering the conversion of a portion of an existing trad IRA to a Roth and showing that I paid the 4th quarter 2023 estimated tax on the full amount of the conversion by the Jan. 15 (or whatever it is) deadline.  Surely this is a very common thing for retired folks using TT (I'm using 2023 Premier Desktop), yet the only instructions I can find are the same ones that Jman42 found for a "Backdoor Roth IRA conversion".  I think I understand how they might work for someone who still has earned income and can make a contribution to a trad IRA, then convert it to a Roth, but it sure doesn't fit my situation.  Very frustrating!  I'm hoping someone out there can point me in the right direction.  

[JuanTumani]

Fixed it.  Apparently I hadn't properly cleared the IRA contribution entry I made following the "Backdoor Roth conversion" article instructions, so I was still getting the messages saying my contribution was not allowed, and the 6% penalty for that was still showing in my total taxes.  First, I went into Forms, deleted the 1099-R for the trad IRA distribution, and deleted the contribution amount showing on the IRA Contributions Worksheet.  Then I went back to Step by Step/Federal Taxes/Wages and Income/Retirement Plans and Social Security/IRA, 401(k), Pension Plan Withdrawals and re-entered the 1099-R for the distribution.  I checked "No" for the next two questions.  For "What did you do with the money from XXXX?", I checked "moved the money to another retirement account..." and "did a combination of rolling over, converting, or cashing out the money", then entered the full amount of the IRA distribution in the box for "Amount converted to Roth IRA account".  Return is now good to go with a small refund instead of a $2.4K payment owed.

The "Backdoor Roth conversion" article cost me a lot of time and hassle, and I still can't find instructions for my particular situation, which again seems like one that would be pretty common for retirees.  Y'all oughta fix this, Intwit!

[jeffsweinberg1]

Totally agree with you on this Juan.  This is burning time that I should have to do for something this common.  Very disappointing