Backdoor Roth IRA 2024 - Turbotax is taxing the entire amount of the conversion (which is incorrect - the conversion amount is the same amount as the basis from the non-deductible IRA that I am converting to Roth.

[tcondon21]

I uploaded the 1099-R information directly from Vanguard.
Box 1 and Box 2 both reflect $7,000 Box 2b is checked (taxable amount not determined

Box 7 reflects Code 2-Early distribution, exception applies

The result with this uploaded information is that entire $7,000 is being taxed.

Note - Also in box 7 IRA/SEP/Simple is checked.

If I add Code G to the 2nd dropdown area for Box 7, then it does not tax the $7,000.

In the Guide Me section for this 1099-R it asks if this is a rollover to a Roth IRA - If I answer yes, then it tells me that there should be a code 1, 2, or 7 and not a code G. There isn't a code G on the 1099-R but i added it to get the $7,000 taken out of taxable income. I don't know if a conversion (which is what i did) is the same thing as a rollover - so i don't know how to answer this guide me question about rollover to Roth or not a rollover to Roth. So for now i am checking the no, it isn't a rollover into a Roth. When I run TT review, it notes an error that I should remove box 7 code G.  I removed it and it once again taxes the $7,000. 

There is no Form 8606 created (I thought it was required).

Lastly, I have 2 Forms 5498 from Vanguard for 2024 - the first one notes that I made a Traditional IRA contribution for $7,000 and reflects that amount in box 1. The 2nd 5498 has the $7,000 in box 3 - Roth IRA Conversion.  There is nothing in box 2 (Rollover contributions) on either of these forms.

This is frustration and I really don't want to force it out of taxable income by adding code G since there wasn't a code G, but I also don't want to pay tax on $7,000 twice. Any ideas are greatly appreciated!

When i run 

TurboTax produces a Roth IRA contribution Limit worksheet if that means anything - says income is too high for a direct contribution to a Roth (ergo the backdoor approach)

However with Code G entered, when I run the TT return review, I get an error stating I need to add a statement to line 4

[NCperson]

@tcondon21 enter the 1099-R EXACTLY as you see it. do not use Code G.  

follow these directions: 

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

note the instructions that this is a two-step process.  You are probably only doing Step 2 without doing Step 1. That is normally the issue. 

[dmertz]

"There is no Form 8606 created (I thought it was required)."

This implies that you did not enter a nondeductible traditional IRA contribution, otherwise TurboTax would have prepared Form 8606 Part I.  This also implies that you did not indicate that the traditional IRA distribution was converted to Roth, otherwise TurboTax would have prepared Form 8606 Part II.

Make sure to enter the traditional IRA contribution under Deductions & Credits.

The Form 1099-R and the Forms 5498 that you received are correct.  As NCperson said, the Form 1099-R must be entered as received.  You are not permitted to change the code to G.  When entering this Form 1099-R, indicate that you moved the money to another retirement account, then you can indicate that you did a combination of rolling over, converting and cashing out and indicate that you converted the entire $7,000 to Roth.

Note that if you had other funds traditional IRAs at year end, the Roth conversion will be a pro rata distribution of pre-tax funds and basis in nondeductible traditional IRA contributions, with the nontaxable and taxable amounts calculated on Form 8606 Part I.