Form 8606 - how to get line 1 filled on Turbo Tax?

[lukeporterbh]

I funding a Roth IRA in 2016 using the backdoor method of contributing to a traditional IRA than converting the entire amount to the Roth. I've never deducted anything from the Traditional and the balance is $0 a year end 2016..

How can I use the software to trigger line 1 of Form 8606? Turbotax just asks me the Basis (which should be $0) and the value at year end 2016 (also $0). Without line 1 entered as $5,500 it thinks the distribution of the same value is fully taxable.

[Critter]

When you enter the 1099-R for the conversion and indicate it was a conversion then all you have to do is enter any prior basis you had in any traditional IRAs.   And then you enter the IRA contribution.  The program will do the rest.

[scrollerdust]

But TurboTax usually transferred the basis in 8606 in prior years.

[AnnetteB · Accepted solution]

Reporting a Back Door Roth contribution in TurboTax is a two-step process.  The step you seem to be missing is reporting the Traditional IRA contribution.  That is where the Form 8606 will be populated.

Here are the general steps you need to take to report a Back Door Roth transaction in TurboTax, either the online or desktop version.  First, take care of the Traditional IRA contribution:

1. Enter “IRA contributions” in the search box located in the upper right corner of the program and initiate the search.

2. Your top search results will be a link to Jump to the section you need.

3. Check the box showing that you contributed to a Traditional IRA.  Remember, that is where you initially put the money.

4. The next screen asks you to verify that you contributed to a Traditional IRA, choose Yes.

5. The next screen asks if the contribution was a repayment of a retirement distribution, choose No.

6. Next, enter the amount that was contributed to the Traditional IRA.

7. The next screen is a little tricky unless you read it carefully.  It is asking if you “recharacterized” the contribution.  This is different from a conversion, so the answer is No.

8. On the next screen (or two), there will be a question about whether you are covered by a retirement plan at work.  Answer according to your situation. 

9. Following that, there will be a question about Excess IRA Contributions.  Answer this according to your situation.

10. Now, we’re at an important step.  The question will be, were there any nondeductible contributions to the IRA.  The answer here is Yes.

11. The next page asks for the basis of the Traditional IRA.  If you have never made nondeductible contributions in the past and kept them in the IRA, your basis is zero.  Otherwise, enter the amount shown as total basis on your most recently filed Form 8606.

That takes care of the first part of the process.  Next, you need to take care of the conversion of the Traditional IRA to the Roth IRA.  When you do this, a Form 1099-R will be issued to report the conversion.  You will simply enter the information from the Form 1099-R into TurboTax using these steps:

1. Enter “1099-R, distribution from an IRA” in the search box located in the upper right corner of the program and initiate the search.

2. Your top search results will be a link to Jump to the section you need.

3. Enter the information exactly as it appears on your Form 1099-R.  Pay special attention to Box 2b, Box 7, and the IRA/SEP/SIMPLE check box.  Click Continue.

4. The next screen is a follow-up question asking whether you inherited the IRA.  Answer No.

5. The next screen asks what you did with the money.  Answer I moved the money to another retirement account.

6. Then, choose I converted all of this money to a Roth IRA account to answer the question that appears. 

7. Finally, there will be a final question to determine whether any of the money was moved back to the traditional IRA.  Answer No.

One final note, if the Traditional IRA earned any money before it was converted to the Roth IRA, those earnings will be taxable on your return. 

[lukeporterbh]

Thank you, AnnetteB! You're right; I mistakenly thought the 1099-R import feature / conversion questions would automatically assume I had made the 2016 Trad. IRA contribution since I knew this in my head, but obviously this isn't certain unless I specifically informed the software. Thanks again!

[AnnetteB]

You're welcome!  Glad it helped.

[JCrandall]

I followed the steps for the backdoor conversion for both myself and my wife. Everything looks correct for me but when I check form 8606-S, Box 1 is 0. Looking at for 8606-T (for me) Box 1 correctly displays $6,000. We contributed after tax funds to both IRAs. I don't understand why it is being reported differently.

[MarilynG1]

If you and your spouse both made non-deductible IRA contributions, you would each have your own Form 8606, as you noted.

Make sure the 1099-Rs were reported correctly for each of you, as well as follow-up questions.  You may want to delete your spouse's 1099-R and re-enter it. 

Click this link for more info on entering Backdoor Roth Conversions.

Here's more info on Form 8606.