Backdoor Roth help - unique situation?

[tmmahesh]

Hi,

I have contributed  to Traditional IRA $7000 around December 15th, 2024 and I rolled over around January 15th, 2025  to Roth (Fidelity took a month to free up the money, because new account). Please let me know what steps I need to take to fill out these information into TurboTax online.

Please help me.

Thanks.

[Opus 17]

Conversions only happen when they happen (in this case, 2025).  For 2024, the only thing you report is a non-deductible contribution to a traditional IRA, this will be reported on form 8606.  You will report the conversion on your 2025 return. 

[DanaB27 · Accepted solution]

You will enter the nondeductible Traditional IRA contribution on your 2024 return and TurboTax will fill out Form 8606 with the basis on line 14 of $7,000. This will get carried over to your 2025 return. You will report the conversion next year on your 2025 return when you get the 2025 Form 1099-R for the conversion.

On your 2024 return:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2023 Form 8606 line 14 (if you had a basis in the prior year)
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

Please see How do I enter a backdoor Roth IRA conversion? for detailed instructions.

[tmmahesh]

Thanks for your quick response. I appreciate it.

I have follow up questions.

- Step 8 you said to choose Yes. But I did not contribute to IRA on year 2023 (I missed contribute, but I did contribute on Year 2022 and previous years). Do I still answer as "Yes"?

- While the money is in Traditional IRA account, there was an interest $14. Is it good idea to transfer to Roth also or leave it in Traditional IRA account?

Thanks.

[DanaB27]

It depends, it that basis still in the Traditional IRA or did you convert it to Roth? If it is still in the Traditional IRA then you will enter the basis from your last filed Form 8606 line 14. If not then you will answer "No" to step 8.

Yes, generally it is best to move the earnings in the Roth IRA.

[Opus 17]

The question is not super effective.  You are being asked about prior basis.  If you are doing a correct backdoor Roth, you have no prior basis because you converted it previously.

You must convert the earnings as well, and pay income tax on them, otherwise it is not a proper "backdoor Roth."  If you have a balance of $7014, of which $7000 is non-deductible basis and $14 is tax-free growth, and you only convert $7000, the pro-rata rule comes into play, and you end up not doing a real backdoor Roth and things get messy.   The point is to convert the contribution and the earnings, but generally you want to do them close in time so the earnings are very small.