Basis of Traditional IRA after ROTH conversion (Backdoor ROTH)

[bkgmasc]

Hello,

For a few years now, around January of each year I've contributed after-tax funds to a traditional IRA for the previous year, and I've always converted the entire amount to ROTH immediately so that there is only a couple of cents of interest left in the traditional IRA every year. I do get the 1099-R and later the 5498 from my financial institution.  However, I'm a little confused as to what should be the basis of my Traditional IRA.  I assume that it should be zero because of the conversion, but for some reason, Turbotax thinks it should be 7000 (which was my last years contribution).  

Just wondering if I made a mistake last year or whether I've misunderstood the whole basis calculation.

Any advice would be very much appreciated.

Thanks!

[MaryK4]

Your Traditional IRA basis should be zero on December 31st if you converted the entire balance. TurboTax likely shows $7,000 because you haven't yet told it that the contribution was converted, or you haven't correctly entered the non-deductible contribution on Form 8606, causing it to treat the contribution as a remaining "basis" or "basis-to-be-taxed". 

In TurboTax, ensure that when you enter the traditional IRA contribution, you answer "Yes" to "Any Nondeductible Contributions?" and later "Yes, make part of my IRA contribution nondeductible" to properly document the $7,000 contribution, even if you convert it instantly.

[baldietax]

the contribution is reported for the prior tax year, but the conversion is reported in the calendar year it is made so you have to carry over the basis of a split-year backdoor like this from year to year.  If you do this every year using 2025 as example you should have some routine on your 8606 like:

Line 1 (2025 contribution [done Jan 2026 for 2025]) - 7k

Line 2 (2024 basis carryover [done Jan 2025 for 2024]) - 7k

Line 3 (total basis) - 14k

Line 8 (2025 conversion [done Jan 2025 for the 2024 contribution]) - 7k

Line 14 (2025 basis carryover to 2026) - 7k

and repeat, next year you will get 1099-R for the conversion you did in Jan 2026 for the 2025 contribution