Backdoor Roth late contribution

[Montgomery2017]

A couple of questions:

I contributed 12000 in 2021 to an IRA for my husband which we converted to a Roth the same year (6000 for 2020, 6000 for 2021.

I had gotten a warning about a penalty for excess contribution to IRA for my spouse. I think I corrected that because I should have only put 6000 for the "contribution for 2021" (instead I had put 12000).   12000 was converted, not contributed.

-I did notice in trying to correct this that when I deleted the 1099R forms, my state refund increased. There shouldn't be any state tax implications for contributing to an IRA with post-tax income, should there? 

- Last question - is there any way to preview the 8606 form on the online Turbotax to ensure it is completed correctly?

Thanks!

[DanaB27]

Yes, you will only enter the $6,000 for 2021 under IRA contributions on your 2021 tax return. The $6,000 nondeductible contribution for 2020 has to be entered on your 2020 tax return and TurboTax will create Form 8606 with a $6,000 basis on line 14. This basis has to be entered on your 2021 tax return. Please see How do I amend my 2020 return?

It depends on your state, sometimes you need to make additional entries during the state interview. What is your state? But let's get this first correctly entered on your federal return and then we can see if you need to make entries during your state interview.

If you want to see Form 8606 you will need to pay for the return before you can see it. Please follow these steps:

1. Select Tax Tools on the left and then Print Center and choose the print center.
2. Pay for the return
3. Select the return and form you want to view.

Please follow the steps below to enter your contributions and conversion. If entered correctly only the earnings should be taxable on line 4b of Form 1040 (assuming your traditional/SEP/SIMPLE IRAs were empty before you started the after-tax contributions).

On your 2020 tax return

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 for 2020 ($6,000)
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. 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).

On your 2021 tax return

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 for 2021 ($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” since you had a nondeductible contributions before this tax year.
9. Enter your $6,000 basis in the Traditional IRA from line 14 of your 2020 Form 8606.
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).

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 ($6,000) and the value of all traditional, SEP, and SIMPLE IRAs

[Montgomery2017]

Thank you for the detailed help! 

I reviewed the IRA contribution info and it seems to be correct. 

The 8606 is also correct. 

However, my state refund is still lower than before I entered the backdoor roths. So, I'm being charged tax on that amount. State is Pennsylvania. Can you help?

Thanks!

[DanaB27]

A conversion of a traditional IRA to a Roth IRA is generally not taxable in PA (PA DOR).

TurboTax should automatically not include the amount in your gross compensation on line 1a.  You can also check your Gross compensation Worksheet.

If you have the conversion included in your gross compensation then it would be helpful to have a TurboTax ".tax2021" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information. 

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.