How and when does form 8606 get triggered in TurboTax (so that I can make sure the taxable amount is reported correctly)?

[grendoly]

Our income exceeds the threshold to contribute to a Roth normally, so in Jan 2023, my husband contributed $6500 to a traditional IRA and immediately converted it to a Roth IRA as a backdoor Roth as he has done for a number of years previously. However, at the end of December 2023, he was unexpectedly forced to roll over one of his 401ks to a traditional IRA (ugh), thus triggering the pro rata rule on his earlier $6500 Roth conversion.

Our understanding of the situation is that now he has a basis of $6500 in his traditional IRA from now and going forward, and that only something like 2% of his contribution is tax deductible because of how much is now in his traditional IRA after the rollover, meaning that the taxable amount of his contribution is slightly less than $6500, and that this is normally calculated on form 8606. However, after entering both 1099-Rs and going through the step by step, form 8606 is not actually triggering. No matter what I click, I either get all of the $6500 being deductible or none of it.

My question is how and when does form 8606 get triggered in TurboTax (so that I can make sure the taxable amount is reported correctly)? Also, should I be reporting this $6500 contribution as deductible or non-deductible?

Details on the 1099-Rs:
On the Backdoor Roth contribution, the only boxes that have anything in them are
1: $6500
2: $6500
2b: checked
7: 2
IRA/SEP/SIMPLE: checked
15: Has State/Payer’s state no

On the 401k rollover: 
1: Amount of account rollover
2a: 0.00
7: G

[DanaB27 · Accepted solution]

If you want to preform a backdoor Roth then you will have to make the traditional IRA contribution nondeductible.

To enter the nondeductible contribution to the traditional IRA:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2022 Form 8606 line 14 (if you had a basis in the prior year)
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the Form 1099-R conversion: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" screen click "Continue" after all Form 1099-R are entered.
6. Answer "Yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2022 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs (this will include the pre-tax rollover amount from the 401k which will trigger the pro-rata rule)

The Backdoor Roth only works if your traditional/SEP/SIMPLE IRAs are empty.  If you plan to use this strategy in the future you might want to think about a reverse rollover where you rollover IRA money to a company plan, like a 401(k). Only pre-tax funds can be rolled from an IRA to a company plan. Therefore, you would isolate the basis and could start the Backdoor Roth procedure fresh. But it only works if your employer allows it, not all plans do.

Please see Who Must File Form 8606 for additional information.

[grendoly]

Thank you SO much! With your thorough and detailed instructions, my question was fully answered and gave me the forms and numbers I was expecting!!!

[toni65]

Thank you so much DanaB27. I've been trying to figure this out for days. Had a similar situation. Added $6500 to IRA and the next day moved it to Roth IRA, in 2023, to try and do the back door Conversion. Then to find out there was a small amount of 401K money that was in my Traditional IRA, so couldn't do the backdoor. Tried unsuccessfully thru my broker, to move it back to my IRA but was told I couldn't. Anyways, I knew form 8606 had to be filled out in TurboTax, but couldn't figure out how to answer the correct questions. Thanks again for your help and to the person that originally asked the question!

[607WSC]

After a few hours trying  to trigger an 8606 for my 2023 taxes--

I've been retired 20+ year and used TT all those years.  I have only traditional IRAs.  This year it took me a few hours to figure out how to trigger an 8606.  I downloaded data  from Fidelity which included IRA distribution info, but I also have an IRA acct at Vanguard. 

I needed an 8606 to show year-end values of both IRA  accts and to calculate only the taxable portion of my distribution.  The data from Fidelity included info on my RMD and generated a 1099-R "Distributions from Pensions, IRAs, etc"    To trigger the 8606 I needed to make entries on this form, 

Inherited or type of IRA:

Check -- from a traditional IRA

Section headed “Traditional IRA Basis and Value Smart Worksheet”

Basis:  quick zoom to enter traditional IRA basis – Taxpayer

Value:  quick zoom to enter year-end IRA value – Taxpayer

Voila!!  An 8606 was generated.  Hope this works for you.