Backdoor Roth Conversion Problems with nonzero Traditional IRA

[whyaretaxeshard]

Hi there,

I'm trying to report a backdoor Roth conversion, but am having some issues and have followed many of the steps on other threads. Like many others I am getting flagged as making "excess contributions" and receiving a 6% penalty for making the maximum $7K contribution. 

The key difference in my scenario is I had a nonzero balance in my Traditional IRA at the end of 2025 (I thought I only needed a nonzero balance when I made the contribution), so I'm not sure if that's why, but I haven't been able to reach the screen where I am able to specify the amount of nondeductible contributions.

I have deleted the IRA deductions & credits and redone them as well as deleted and re-added all my 1099Rs; just to see if that would change anything, but I'm still getting a 6% early withdrawal fee penalty. Again it doesn't seem like I should get a penalty (and I definitely don't want to be getting this penalty yearly), if it's a backdoor conversion.

I'm trying to use TurboTax to self-report, and not have to go to a CPA, so is there any way to correct it and do it on this platform? Should I file the 8606 separately somehow or amend it later? Just trying to understand my options, thanks!

[baldietax]

it's nothing to do with the balance in your IRA that is a common situation.  If you have an IRA balance it will affect the taxability of the backdoor Roth as the Roth conversion is considered taken in a pro-rata manner from your pre-tax balance and basis, so some part of the backdoor Roth will be taxable, and the remainder of your contribution will rollover into your basis for future years until you bring the Trad IRA balance to $0.

If you are getting an over-contribution message then my guess is you don't have enough "earned" income (W2 etc).  IRS sets a contribution limit, but you also can't make IRA contributions (to Trad or Roth) above your earned income.

For reference here are the steps

https://ttlc.intuit.com/turbotax-support/en-us/help-article/retirement-benefits/enter-backdoor-roth-...

[dmertz]

A 6% penalty is for an excess contribution.  When entering your traditional IRA contribution, make sur that you answer No, when TurboTax asks of you recharacterized or "switched" your contribution to be a Roth IRA contribution instead.  You did not.  You converted to Roth (assuming that you have no Form 1099-R with code N or code R in box 7).

As baldietax said, TurboTax will also flag an excess contribution if you did not have sufficient compensation to support the traditional IRA contribution, but that seems unlikely under the circumstances.