Form 8606

[a7035477456]

"BACK DOOR ROTH" filing is NOT well know, so even Brokerage people file 1099-R wrong when I ask them to roll my post-tax deposit to IRA and then immediately roll to ROTH.  So be aware they put on all 1099-R box 7 code "2" which is like saying 'You took $7,000 out to go casino or shopping mall". 

Your job is to correct into a "Back Door Roth".

If leaving code "2" on 1099-R, I get tax 24% of the $7,000, or $1,680 added instantly to my total TurboTax due box.  This is wrong since $7,000 is post-tax (it came from my WellsFargo, so it's post-tax or already tax). So by converting to Code "G: DIrect rollover and rollover contribution" (not "H: Direct rollover of a designated Roth account distribution to a Roth IRA"), it prevents 24% or %1,680 from adding to my total tax. 

Note if IRA $7,000 already there, then it's a "Conversion" true,

but if it's deposited and "then backdoor Rollover to Roth" then it's a "G: Rollover" and so a "Backdoor" since it prevents from being taxed again.  My Broker said broke must generate a "2: taxable distribution", but it's your job as tax filer to "Change" it to whatever since ONLY you know what is up (which is a case of Back door Roth).  He is familiar with Backdoor Roth rollover and said you MUST/SHOULD/ALLOW change 1099-R box 7 explains what you doing. 

Do not leave it a "2" since it means it's a distribution and IRS taxes you and thinks you take it out to go shopping with the $7,000, which is not the case. 

Make sure you print and manually file 8606 (Turbo Tax buggy, will not generate 8606), as Amend 1040SX if you e-file with TurboTax.  If you print and file, then simply insert form 8606 and mail to IRS.

[dmertz]

The code 2 is correct.  Code G is incorrect.

The taxable amount must be calculated on Form 8606.  Either you've provided TurboTax with an incorrect amount for your basis in nondeductible traditional IRA contributions, resulting in an incorrect calculation on Part 1 of Form 8606, or you have a nonzero year-end balance in traditional IRAs, causing your Roth conversion to be largely taxable because only a small amount of your basis applies to the Roth conversion.

[dmertz]

The fact that you are doing a "backdoor Roth" has nothing to do with how the brokerage prepares Form 1099-R.  Someone under age 59½ doing any Roth conversion in-house should always see code 2 in box 7 of the Form 1099-R.

[a7035477456]

change "2" to "G" or "N"
No "H"

[a7035477456]

Form 8606 pop in and out and many time by time you file, it's gone.  TurboTax have bug on generating form 8606.  Seem entering your full address on 8606 seem to keep 8606 around.  But safest to Amend and attached 8606 via manual print each year is SAFEST.

[mrjang]

It didn't work. 

Although TurboTax correctly posts the taxable portion of the distribution, it does not generate Form 8606.  

How can I add this form in efile? 

[suramom]

find the form in the list of forms in the program and it fills in most of it, i recall.  It was confusing but it gets transmitted with the return after filling it out.

[dmertz]

For a Roth conversion from a traditional IRA you must indicate that you moved the money to another retirement account, that you did a combination of rolling over, converting and cashing out, then enter the amount converted to Roth.

If this was a rollover from a traditional account in a qualified retirement plan (401(a), 401(k), 403(b), governmental 457(b) or the federal TSP) to a Roth IRA, nothing of this is to be reported on Form 8606.  Form 8606 is only used for reporting nondeductible traditional IRA contributions and certain distributions IRAs.