Backdoor roth IRA conversion in early 2017 ($5,500 for 2016 and $5,500 for 2017) entered correctly but I am still being taxed on $5,500 of it.

[DianeW]

It works basically the same way this year as it did last year.  Non-deductible contributions offset taxable conversions.  Both must be entered. This so-called “back-door Roth” method ONLY works if you have NO OTHER Traditional IRA accounts.  If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself.  Only if you started with NO Traditional, SEP & SIMPLE IRA and ended up with a zero amount in ALL Traditional, SEP & SIMPLE IRA accounts will this Roth conversion not be taxable.

• First you must enter your Traditional IRA contributions (if there were 2017 contributions).

1. IRA contribution
2. Federal Taxes,
3. Deductions & Credits,
4. I’ll choose what I work on (if that screen comes up),,
5. Retirement & Investments,
6. Traditional & Roth IRA contribution.

Be SURE to answer the follow up that you are choosing to make this contribution NON-DEDUCTIBLE - if that screen comes up. (DO NOT say that you moved (recharacterized) the money to a Roth) – this is a conversion, not a recharacterization.

• Then enter the 1099-R that shows the distribution.

1. Federal Taxes,
2. Wages & Income
3. I’ll choose what I work on (if that screen comes up),,
4. Retirement Plans & Social Security,
5. IRA, 401(k), Pension Plan Withdrawals (1099-R).

 Answer the follow-up questions,  answer the question that you moved the money to another retirement. The screen will open up with choices of where it was moved.  Choose you converted it to Roth IRA.
When asked if you have made any non-deductible contributions say "yes" if you did then enter the non-deductible contributions made for tax years before 2017.     (Usually zero unless you also made a 2016 or earlier non-deductible contribution).

Enter the 2017 year end value of your Traditional IRA a "0" (zero) - if it is in fact zero - this tax free Roth conversion will not work if it is not zero.

• Note: If you had any other Traditional IRA at the end of 2016, then the nondeductible "basis" must be pro-rated over the current distribution and the total IRA value and only a portion of the Roth conversion will be nontaxable and part will be taxable, with the remaining non-deductible basis carrying forward for future distributions.  You can never only withdraw the nondeductible basis as long as the IRA exists and has a value more than zero.

The non-deductible amount of your contribution will be subtracted from the taxable amount of the conversion on the 8606 form and entered on line 15a of the 1040 form and a zero taxable amount on line 15b  if you did it right.

Use the following steps to being the process in TurboTax:

1. Search for ira contributions > Jump to ira contributions
2. Continue to answer the questions as noted above 
3. Click the images to enlarge and view for assistance.
4. Preview My 1040:  Select Tax Tools > Tools > View Tax Summary (preview is on the left).

[zeppelin1977]

Hi, Thank you for the very helpful post. Can you confirm something though? Do you mean: "Note: If you had any other Traditional IRA at the end of **2017**"? Not 2016. Thanks. Regards, Ben