Can I make a nondeductible traditional ira and immediately convert it into roth? I have Roth IRA and 401k. Do I have to report Roth IRA balance on form 8606?

TurboTax will fill out the 8606 for you if you properly enter both the non-deductble contribution and the 1099-R that reports the distribution that you convert to to a Roth.

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  If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself.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).

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

Be SURE to answer the follow up that the 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 recharactorazition.

Then enter the 1099-R that shows the distribution.

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),,
Retirement Plans & Social Security,
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.

[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 non taxable and part will be taxable, with the remaining non-deductible basis carrying forward for future distributions. You can never only withdrew 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 then 8606 form and enter on line 15a of them 1040 form and a zero taxable amount on line 15b  if you did it right.

Also see this website that has some screenshots of the procedure
http://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html

You'll report the nondeductible traditional IRA contribution made for 2017 on your 2017 Form 8606.

If you do the Roth conversion in 2017, the conversion will also go on the 2017 Form 8606.  If you do the Roth conversion in 2018 instead, the basis in nondeductible traditional IRA contributions will carry forward to your 2018 Form 8606 where you'll report the Roth conversion.

Do I have to wait to convert?

No.  There is no waiting period.   Once the Traditional IRA is established you can convert it to a Roth.  The Traditional IRA custodian might take a day or two to establish and post the contribution.  Ask the custodian how soon it can be converted.

You indicate that the conversion to a Roth Ira should be entered by entering the information from the 1099-R. However, the 1099-R will not be issued until after the tax season. How do I get around this? I believe I have all of the relevant information - Date nontraditional Ira was established; date of the conversion to a Roth Ira; the amount contributed to the non-tradional IRA; the amount converted to a Roth IRA; the basis amount for the conversion.

You can enter the income on the return now with the numbers you have or you can do an amended return later with the forms available.

@rfritz48

 

@rfritz48 , the Roth conversion performed in 2022 has nothing to do with your 2021 tax return.  It's reportable on your 2022 tax return and you will have received the 2022 Form 1099-R needed to do that.

The Roth conversion was not performed in 2022, but in November 2021 so it has everything to do with my 2021 return. My broker usually sends out the 1099-R forms around May 15th, so I will not have the form available in time for my return. I have monthly broker statements for both the nondeductible tradional IRA and the Roth IRA that show the conversion amounts and dates as well as the original deposit and date. The value of the nondeductible traditional IRA was the same on the date of conversion as the amount contributed.

You indicate I can enter the data now that I have on the 8606 form. How do I do this? When entering the information about this years IRA, I see where information concerning a recharacterization can be entered but do not see where infornation concerning a conversion can be entered. 

If your IRA account has your 2021 nondeductible IRA contribution only, follow the two-step process to enter your backdoor Roth conversion. During the first step when you enter your Traditional IRA contribution, Form 8606 should be generated to track the basis of your IRA. The 5894 form should show the IRA contribution of $xx. By now, you should have received the 1099-R form for the conversion. Check with your brokerage, make sure it is a recharacterization instead of Roth conversion.

 

 

Follow the two-step process to properly enter your backdoor Roth conversion:

 

Step 1: Enter the Non-deductible contribution to a Traditional IRA:

 

1. Open your return if it's not already open
2. Inside TurboTax, search for ira contributions and select the Jump to link in the search results
3. Select Traditional IRA on the Traditional IRA and Roth IRA screen and Continue
4. Answer No to Is this a Repayment of a Retirement Distribution?
5. On the Tell Us How Much You Contributed screen, enter the amount contributed and continue
   • Enter $6,000 for Your total 2021 traditional IRA contributions
6. Answer No on the Did You Change Your Mind? screen
7. Answer No on Any Excess IRA Contributions Before 2021?
8. Answer Yes, I made and tracked nondeductible contributions to my IRA, or No, I did not make and track nondeductible contributions to my IRA. If you don't have any other Traditional IRA accounts, you can answer Yes
9. Enter $0 for Total Basis as of December 31, 2020 on next screen if you don't have any basis as of the end of 2020.
10. Answer the questions on the following screens, until you reach Choose Not to Deduct IRA Contributions. Select Yes, make part of my IRA contribution nondeductible and enter $6,000 in the box. 

 

Step 2: Enter the Conversion from a Traditional IRA to a Roth IRA

 

 

 Inside TurboTax, search for 1099-r and select the Jump to link in the search results

1. Answer Yes to Did you get a 1099-R in 2021?, then Continue
   • If you land on Your 1099-R Entries screen, select Add Another 1099-R
2. Select how you want to enter your 1099-R (import or type it in yourself) and follow the instructions
3. Answer None of these apply when you reach the screen Do any of these situations apply to you?
4. Select I converted some or all of it to a Roth IRA on the Tell us if you moved the money through a rollover or conversion screen
5. Next, choose Yes, all of this money was converted to a Roth IRA
6. Continue answering questions until you come to the Your 1099-R Entries screen

To check the results of your backdoor Roth IRA conversion, see your Form 1040:

1. On the left side of your screen, select Tax Tools, then Tools
2. Under Tool Center, select View Tax Summary
3. On the left side of your screen, select Preview my 1040
   • Your backdoor Roth IRA amount should be listed on Form 1040, Line 4a  as IRA distributions
   • Taxable amount should be zero unless you had earnings between the time you contributed to your Traditional IRA and the time you converted it to Roth IRA, then the earnings would be taxable
   • Schedule 1, Line 20 IRA deduction, should be blank
4. Select Back on the left side of your screen to return to where you left off in TurboTax

 

 

@rfritz48

@rfritz48 , you said that the Form 1099-R will not be issued until after tax season, so I assumed that the conversion was in 2022.  The 2021 Form 1099-R was required to be issued by January 31, 2022, so contact the IRA custodian to obtain the missing form if you do not yet have it.

 

It's Form 5498 that is not required to be issued until May 15, 2022.  You do not need this form to prepare your tax return.  You can get your year-end balance from your year-end account statement.

 

Because you have pre-tax money in traditional IRAs, your Roth conversion will be partially or mostly taxable with only some of your basis in nondeductible traditional IRA contributions being applied to the conversion on Form 8606.  The rest of your basis will remain with your traditional IRAs to be applied against future distributions.  You'll always have some basis remaining in your traditional IRAs until all funds have been distributed from your traditional IRAs.

Thank you. As you suggested, I contacted the broker and was able to download and print the 1099-R form. I have now completed my return and the conversion now shows on the 8606 form.