"Enter Prior Year Roth IRA Contributions" seems to auto-include mega backdoor roth (rollover) amounts. Is that right or wrong?

[pher]

TurboTax has this question in the section for tracking my Roth IRA cost basis:

"Enter Prior Year Roth IRA Contributions"

"Confirm [name]'s net regular contributions prior to 2024 that remain in [name's] Roth IRA. Learn More"

"Note: Do not include earnings and losses or amounts converted from a traditional IRA. Learn More"

Then there is a field below that says "Roth IRA Contributions prior to 2024". This seems to have auto-filled (based on my previous years of using TurboTax) with not just my direct Roth IRA contributions, but also my mega backdoor Roth amounts (i.e., after-tax 401k → Roth 401k → Roth IRA).

I understand that the mega backdoor Roth should get added to my Roth IRA's cost basis in general, but I'm getting confused about the wording of TurboTax's question and whether the auto-filled amount is correct. My understanding is a mega backdoor Roth is a rollover from a Roth 401k and is NOT considered a contribution to the Roth IRA -- but TurboTax is including it in the auto-filled amount where it is literally asking for "Roth IRA Contributions".

Is the page incorrectly worded and the amount is correctly included -- or is the page worded as intended and the amount is incorrectly included?

[DanaB27 · Accepted solution]

Yes, a rollover from the Roth 401k is added to the "Roth IRA Contributions prior to 2024" amount.

Form 8606 line 22 instructions state: "Increase the amount on line 22 by any amount rolled in from a designated Roth, Roth SEP, or Roth SIMPLE account that is treated as investment in the contract."

[pher]

Thank you! That really helps. It's good to know that this TurboTax page corresponds to Line 22, and it makes sense based on the IRS instructions that Roth roll-ins are purposefully included. I guess then I'm a bit confused at how TurboTax seems to be inconsistently using the word "contributions" across its different pages, and wonder if this page needs to be updated for clarity. Here's what I mean.

In an earlier page, TurboTax asks, "Roth IRA Contributions / Did [name] make a Roth IRA contribution for 2024?" In this section, it seems to be using the classic definition of a *direct* contribution (and not roll-ins), as this page is presumably relevant to the fact that there's a yearly contribution limit and/or there's a tax implication based on MAGI limits.

But on this "Roth IRA Contributions prior to 2024" page for calculating cost basis, it's using the same word "contributions" — but as you pointed out, it actually includes more than direct contributions. Perhaps this page should be updated to say something along the lines of "Roth IRA contributions or roll-ins from a designated Roth 401(k), Roth 403(b), Roth SEP, or Roth SIMPLE account"? Is there a way to submit that request/feedback to the product team?

[DanaB27]

We at Intuit TurboTax want our users to be completely delighted with their experience using our products and services, and successful in their financial lives and businesses. 

Once you file your return, as long as the settings to receive communication from Intuit don’t block it, you will see a pop-up message or receive an email with a survey asking you about your experience. We encourage you to leave your notes and comments there. “Voice of the Customer” notes and comments are read and acted upon.

If you are using TurboTax Desktop, you can also leave feedback at the Final Steps tab: