Backdoor Roth in Pennsylvania

[LostInTaxes11]

Hi!

In 2019 I contributed $6,000 to a non-deductible IRA and then converted it into a roth IRA (backdoor IRA). I am having trouble with inputting my backdoor IRA on turbotax. The federal part seems correct, but when I get to the Pennsylvania tax section, it keeps wanting to list the $6,000 as income for Pennsylvania. I have it coded as an early distribution from a retirement plan. It lists the gross distribution as the $6,000, a cost basis of $0.00 and then PA Income of $6,000. Would it be correct to list the basis as $6,000 in this case? Thank you so much!!

[DeanM15 · Accepted solution]

As this is a contribution to a non-deductible IRA, your basis would be $6000. You paid Federal and PA tax on this income already.

However, your basis should be carried forward from the federal IRA. I would check your federal form first, before changing anything on the PA return. 

To pull up a copy of your 2019 Form 1040 and Schedules 1 to 3, follow these directions:

• You should be signed in and working in TurboTax
• Click on Federal in the main left-hand side menu
• Click Tax Tools, then Tools in the main left-hand side menu
• In the pop-up window, click on View Tax Summary
• The left-hand menu has now changed, click on View My 1040

You should see that none of the 6K is coming through as income on Line 4 of the 1040. You should also see no Penalty on Line 6 of Schedule 2.

[pixelrogue]

This was a good response.

Confirmed the federal form was accurate, and yet the PA form never picked it up. Glad it accommodated the manual edit. 

[pixelrogue]

@dea 

Dean, have someone similar, yet on the fringe case it seems.

Megaroth 401k backdoor conversion. Same concept here as IRA backdoor conversion yet for 401k.

I have a form that states Gross Distribution. 
Think this was all entered properly in both Federal and State, yet not quite able to confirm.

The one spot that has me scratching my head is the Retirements Income Summary. The Gross Distribution is listed in the first column. Basis is blank. PA Income reads 0. Given the concept is identical, I presume I need to enter the Basis as the same as the Gross Distribution. 

If Megaroth Backdoor conversion is not familiar DM and I will be happy to share resources. 

UPDATE
There is no way to manually assign the basis here. Form is pulled from federal. Think this is actually accurate and would appreciate a confirmation if possible.

[easytax]

same here. can manually input basis to adjust. 

[GlennAmmons]

I am no expert, but I don't think this answer is correct. If the IRA earned money before it was converted, then you _do_ owe federal taxes on that gain. But according to PA:

https://revenue-pa.custhelp.com/app/answers/detail/a_id/274/~/taxability-of-roth-iras-according-to-p...

you do _not_ owe PA taxes on the gain, as long as you really did convert the entire distribution to a Roth.

Put another way, you should not use your basis for federal tax purposes as your basis for PA purposes. I think this all stems from the fact that PA taxes both IRA and Roth IRA contributions when you make them, and doesn't tax distributions from either kind of IRA when you take them in retirement.

I marked mine in the dropdown as a "rollover", because the page I linked above gives the same rules for "roll overs and plan conversions".

[Pixelrogue2]

Thank you, and seems like a great point to bear in mind. 

Generally ok as backdoor efforts are prompt to minimize fluctuation in balance.

 Interestingly enough, your info may come in handy again as e we are thinking about another conversion opportunity.