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Returning Member
posted Mar 21, 2022 5:53:15 PM

Backdoor Roth IRA Conversion Error?

I made a non deductible IRA contribution for the $6,000 limit. I am over the income limit so did a backdoor Roth IRA. Invested the $6k in money market and after 6 days converted it into a Roth IRA.

There was $0 market return, so hence there should be no tax basis needed, per the IRS rules, from all my investigation (and my I did it in the first place)

 

Now in Turbotax I followed the articles on how to enter it, and it is is still showing the $6k as taxable on Form 1040 (line 4a shows $6,000 and line 4B should be $0 but it is $6k)

 

Unsure what issue is occurring?

Or is my tax assumption incorrect - the IRA was from post tax money, no deduction was taken, and then I pay tax again on the $6k to convert to a Roth IRA - pretty sure this is NOT meant to be the case.

 

 

 

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1 Replies
Expert Alumni
Mar 22, 2022 4:52:24 AM

If you did not have any earnings and no pre-tax funds in the traditional IRA then 4b taxable amount should be $0 when you enter the backdoor Roth correctly. Please review the steps below.

 

 

To enter the nondeductible contribution to the traditional IRA:

  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 ($6,000)
  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 contributions before this tax year.
  9. If you had a basis in the Traditional IRA before then enter the amount.
  10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter $6,000 (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).

 

To enter the 1099-R distribution/conversion: 

 

  1. Click on "Search" on the top right and type “1099-R”
  2. Click on “Jump to 1099-R”
  3. Click "Continue" and enter the information from your 1099-R
  4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
  5. On the "Your 1099-R Entries" screen click "continue"
  6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
  7. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs