I'm trying to understand the steps to account for a backdoor Roth conversions for Traditional IRA contributions made in 2021 for tax year 2020. Each of the following contributions are non-deductible:
1 - Contributed $3,000 to a Traditional IRA in 2021 for tax year 2020, then converted the $3,000 to a Roth IRA immediately.
2 - Contributed another $6,000 to Traditional IRA in 2021 for tax year 2021, then converted the $6,000 to Roth IRA immediately.
For the purposes of contributing to a Traditional IRA, I believe I'm all set given I contributed $6k or less in total for each tax year. However, I have 1099-R forms showing a total of $9,000 in distributions from the Traditional IRA.
I'm trying to figure out how to enter this in Turbo Tax. I'm receiving a message saying the $3,000 is taxable. Is the $3,000 (contributions in 2021 for tax year 2020) considered as part of the Traditional IRA total basis as of Dec 31, 2020? Are there other steps?
Note: I did not include this $3,000 on my 8606 from 2020 because I had already filed my returns and wasn't planning on additional 2020 contributions. Do I need to amend my 2020 return for this, or will my updated 8606 for 2021 suffice?
Thanks in advance for your help!
If it was a 2021 contribution *for* 2020 then it had to be reported on your 2020 tax return as a non-deductive contribution on a 2020 8606 form for you to apply it to a distribution/conversion.
You need to amend 2020 and add the non-deductible contribution in the IRA contributions section and mark it non-deductible to produce the 2020 8606 form.
Then on 2021 tax in the 1099-R interview you say you had $3,000 of prior year non-deductible contributions that comes form line 14 on the 2020 8606 form.
If it was a 2021 contribution *for* 2020 then it had to be reported on your 2020 tax return as a non-deductive contribution on a 2020 8606 form for you to apply it to a distribution/conversion.
You need to amend 2020 and add the non-deductible contribution in the IRA contributions section and mark it non-deductible to produce the 2020 8606 form.
Then on 2021 tax in the 1099-R interview you say you had $3,000 of prior year non-deductible contributions that comes form line 14 on the 2020 8606 form.