In 2023 I ordered my IRA custodian- to do a backdoor IRA to Roth Conversion. I asked my custodian for a $40K conversion and they moved securities from my IRA to my Roth IRA. TT desktop help guide said I needed to do a 2 step process.
Backdoor Roth IRA conversion:
Step 1: Enter the Non-Deductible Contribution to a Traditional IRA. Then the software blew up. 40K was much more than the allowable contribution. TT and the associated guidance needs to be updated. There isn't a limit on how much to convert when you're just recharacterizing from one type of retirement account to another one. See IRS publication 590a Page 28
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Converting From Any Traditional IRA Into a Roth IRA
Allowable conversions. You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. If properly (and timely) rolled over, the 10% additional tax on early distributions won’t apply.
However, a part or all of the distribution from your traditional IRA may be included in gross income and subjected to ordinary income tax.
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The TT instructions need to be updated- among other problems it's penalizing me for an 'early' withdrawl on a transfer from one account to another.
It's working now. There was an update today- I don't know if it was related. I didn't follow the 2 step directions - they didn't apply.
Just fill in the information on the 1099-R very carefully. It's not considered a rollover of funds. If you've deducted the taxes in the past, you have a zero cost basis - meaning everything is taxable. Do not do any steps implying there are new contributions.
When I filled in the information correctly in the 1099-R TT automatically populated part II on form 8606 correctly reflecting the backdoor Roth Contribution. Did a review and TT didn't find any errors.