Converting a traditional ira to roth ira (backdoor roth) is causing a tax liability. How do I correct this?

[macuser_22]

That is a common mistake.  Like many things that seem to good to be be true, the Backdoor Roth has that built in pitfall.  People with per-existing IRA's cannot use it,

[aremedios777]

@macuser_22 : Well, for people whose MAGI are above the threshold allowed to contribute directly to their Roth IRAs, the backdoor IRA can still be used as a vehicle for getting funds into their Roths that they otherwise wouldn't be able to do.  It's just important to understand the tax consequences.

Also, if I may ask...are you a tax professional?

[macuser_22]

No, I am not a professional, just a volunteer been answering these questions for over 12 years.   (This is a user-to-user forum). (You can hover your mouse over a user name to see their history.)

Yes, you can always convert a Traditional  IRA to a Roth and pay the tax on the Traditional IRA distribution.  That is just a normal conversion.

The whole point of a "Backdoor Roth" is to do that without paying additional tax on the conversion (the non-deductible after-tax Traditional IRA contribution offsets the tax on the conversion).   When you convert a mixture of before and after-tax Traditional IRA then the before tax amount is taxable.

As said above, you can never only convert the after-tax money if there is any year end balance in any Traditional IRA - that defeats the purpose of a Backdoor Roth.

[aremedios777]

Well, thank you for all your help!

[pixelrogue]

This is the closest I have seen to doing it right, however TurboTax has now changed and looking for a confirmation on the proper steps for 2018 return.

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/3582070-backdoor-roth-ira-contribution">https://ttlc.intuit.com/qu...>

[macuser_22]

@bogo - You are referencing a 2 year old post and this question is a year old.   Both are probably out of date.
What exactally are you asking?

[pixelrogue]

@macuser_22 Same exact concept, steps to properly record an backdoor Roth IRA conversion for 2018.

[macuser_22]

Concept is the same but form numbers have changed.

[pixelrogue]

@macuser_22  Yes, and the steps themselves have changed. Each year this topic seems to be handled differently and at the moment I am hitting that 'double taxation' situation again, early withdrawal w/exception code isn't cutting it.

[macuser_22]

@bogo what are you doing that is different than my answer above?   The early distribution should not matter unless the year end value of all Traditional IRS's was not zero or you failed to enter the non-deductible contributions correctly.

[pixelrogue]

Not quite sure..and the steps do not match up in 2018 TT.
There is 'one' difference but not enough of one to throw everything off....where my income qualifies for deduction (for 2018, normally not) where wife's income would not

In the summary view of income, it appears as though we have both taken deductions from IRA.

[macuser_22]

What step does not match?

Note that my answer says: "Be SURE to answer the follow up that the are choosing to make this contribution NON-DEDUCTIBLE - if that screen comes up."

A backdoor Roth only works if the Traditional IRA contribution is non-deductible.   It may or may not qualify for a deduction if your MAGI is under the phase-out amount and you are not covered by a retirement plan at work.   You don't want the deduction for a Backdoor Roth.  That screen won't come up unless it is all or partially deductible.

Also, your IRA and your spouses IRA are totally separate and cannot be combined.

[pixelrogue]

@macuser_22

Yes- no attempt to comine ira contributions.

Here are the 2018 Steps:
1098-R Entries
1) Who owns 1099-R
2) 1099-R Info (1099-R entry screen / data from form)
3) Info Screen (nonextra tax due)
4) Inherited? - no
5) What was done with money? Moved to another retirement account . Choose which applies: Converted all this money to Roth IRA account.

Non-deductible not displaying. Is there a line number to double check on the 1099-R form itself?

[macuser_22]

Yes you converted it to Roth.

Be sure to continue the interview AFTER the 1099-R summary screen.  That is where it asks about non-deductible contributions.

[pixelrogue]

Additional questions beyond summary screen:

- 2016 Qualified Disaster (me)
- Repay 2016 Hurricane Distribution (me)
- 2016 Qualified Disaster (wife)
- Repay 2016 Hurricane Distribution (wife)
- 2017 Qualified Disaster (me)
- Repay 2017 Hurricane Distribution (me)
- 2017 Qualified Disaster (wife)
- Repay 2017 Hurricane Distribution (wife

- Any Nondeductible Contributions (me) - yes *
- Basis - entered (full amount) (me) *
- Value of Traditional IRA (as of Dec.31,18) (me)  ($0.00)
- Any Nondeductible Contributions (wife) - yes *
- Basis - entered (full amount) (wife) *
- Value of Traditional IRA (as of Dec.31,18) (wife)  ($0.00)

>> Saying no to nondeductible contributions then skips the basis wuestion.

Social Security Benefits
Canadian etc...drifting away fron1099-R