Complications with backdoor roth IRA 2018 and 2019.

[BHN1618]

Hi, 

I'm having a difficult time inputting the information into Turbotax premier 2019. 

Here are the steps I've taken:

02/09/2018 Funded Roth IRA $5500

01/23/2019 Funded Roth IRA $6000 (limit went up)

Realized that for 2018 and 2019 my income was higher than what is allowed for Roth so I spoke to vanguard and they advised me to a do a recharacterization to Traditional IRA for 2018 & 2019  and then a conversion to Roth. 
Note: I already filed my taxes for 2018 when I figured this out and in 2018 I had just shown that I had contributed to my Roth.

I did not file form 8606 for 2018 or 2019.

04/04/2019 Recharacterization of 2018 Roth to TIRA: $5964.92
04/04/2019 Recharacterization of 2019 Roth to TIRA: $6488.36
04/05/2019 Conversion of TIRA to Roth $12509.81

When I follow the "backdoor roth guidelines on turbotax" and then go to Tools >Forms> 1040 > line 4 
> 4a shows distributions of $18998 and 4b shows taxable amount of $7010


My Questions:
1) From my understanding since I converted both the 2018 and 2019 Traditional IRA to Roth I will pay taxes on the excess for both in 2019.
I put in 5500+6000=11500 and I took out 12509.81 so wouldn't I only pay tax on the difference ie $1009.81 instead of $7010 (I think it is rounding up 7009.81)?
I am wondering if it's possible this is correct since the $7009.81 is taxable but then we have a $6000 adjustment. Please let me know if that is the way it is supposed to be?

2) Do I need to file form 8606 for 2018 and 2019 or only 2019? Does Turbotax do this for me?

3) Do I need to amend 2018 tax return since I had submitted it with the info that the $5500 went into a Roth and then afterward on 04/04/2019 I recharacterized it to traditional IRA to then backdoor it back into a Roth on 04/05/2019. 

[dmertz · Accepted solution]

1.  You are correct that the taxable amount is $1,010.

2.  The Roth conversion performed in 2019 is reportable on your 2019 tax return, not on your 2018 tax return.  The $5,500 from line 14 of your 2018 Form 8606 propagates to line 2 of your 2019 Form 8606.  The amount presently missing from your 2019 Form 8606 is the amount of your $6,000 nondeductible traditional IRA contribution that resulted from the recharacterization of your $6,000 Roth IRA contribution.  Make sure that you go back to the Traditional and Roth IRA Contributions section in 2019 TurboTax and, just as you did (or should have done) for your 2018 contribution in 2018 TurboTax, enter the $6,000 Roth IRA contribution, indicate that you recharacterized $6,000, then indicate, if TurboTax asks, that the resulting traditional IRA contribution is to be nondeductible.  TurboTax will include this on line 1 of your 2019 Form 8606 to be added to the $5,500 on line 2.

3.  Your 2018 tax return must include 2018 Form 8606 showing your nondeductible $5,500 contribution to your traditional IRA for 2018, and perhaps already does.  If not, it must be filed.  This would have been done by entering your $5,500 Roth IRA contribution, indicating that you switched/recharacterized the $5,500 to be a traditional IRA contribution, then, if TurboTax asks, indicate that you want the entire $5,500 to be treated as nondeductible.  Line 14 of the  2018 Form 8606 will show $5,500.

[pulse818]

Thank you for your response.

About #2)

a) I did the recharacterization and conversion for both the 2018 and 2019 amounts in April 2019 (After filing 2018 taxes). Does this mean I need to amend 2018 tax return?

b) 
"The amount presently missing from your 2019 Form 8606 is the amount of your $6,000 nondeductible traditional IRA contribution that resulted from the recharacterization of your $6,000 Roth IRA contribution."

• Where in turbotax do I add this?

3) based on what you said and my note that I filed 2018 taxes (money in Roth) prior to doing any of this would you recommend that I first amend 2018 taxes before attempting to finish 2019 taxes?

[dmertz · Accepted solution]

a)  Roth conversions are done in a particular year, not for a particular year.   If your 2018 tax return already reports the $5,500 traditional IRA contribution that resulted from the recharacterization of the Roth IRA contribution, either as deductible on Schedule 1 line 32 or as nondeductible on Form 8606 line 1, there is no need to do anything with your 2018 tax return.

b)  Already answered:  "Make sure that you go back to the Traditional and Roth IRA Contributions section in 2019 TurboTax and, just as you did (or should have done) for your 2018 contribution in 2018 TurboTax, enter the $6,000 Roth IRA contribution, indicate that you recharacterized $6,000, then indicate, if TurboTax asks, that the resulting traditional IRA contribution is to be nondeductible.  TurboTax will include this on line 1 of your 2019 Form 8606 to be added to the $5,500 on line 2."

3)  If your 2018 tax return does not show the traditional IRA contribution on either Schedule 1 line 32 or Form 8606 line 1, or your 2018 tax return shows the traditional IRA contribution as a deduction on Schedule 1 line 32 but you wish it to be a nondeductible contribution instead, you must amend your 2018 tax return.  While it's not entirely necessary to do the amendment first, it's better to do it first or at least prepare it at the same time since the amount that appears on your 2019 Form 8606 line 2 must be the same as the amount on line 14 of your 2018 Form 8606.  Any change to your 2018 tax return must be filed by mailing; it cannot be e-filed.  The IRS initial checking of your 2019 tax return will likely not include checking against your 2018 Form 8606 which would delay any refund with respect to your 2019 tax return, but may later detect a missing Form 8606 to corroborate the amount you will have shown on line 2 of your 2019 Form 8606 and inform you of a balance due.