How do I enter a backdoor Roth IRA conversion if my conversion contains contributions made in 2021 for both 2021 and 2020

If you didn't file Form 8606 last year then you will need to amend your 2020 tax return to include the $6,000 nondeductible contribution. Please see How do I amend my 2020 return?

On your 2020 tax return enter the nondeductible contribution to the traditional IRA:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed ($6,000)
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. 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).

TurboTax will create Form 8606 for you and you should have the basis of $6,000 on line 14 to carry to 2021.

On your 2021 tax return

To enter the nondeductible contribution to the traditional IRA:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed ($6,000)
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” since you had nondeductible contributions before this tax year
10. Enter your $6,000 basis in the Traditional IRA from your 2020 Form 8606 line 14.
11. 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 1099-R distribution/conversion:

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?"
12. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

Super appreciate for the reply. A few questions.

1. On my 2021 return to enter the nondeductible contribution to the traditional IRA:

1.1 after #10 - Enter your $6,000 basis in the Traditional IRA from your 2020 Form 8606 line 14. It is asking 'Tell Us the Value of All Your Traditional IRA Accounts'. What is it going to be? 0 or 6000? I have converted $6,000 from Traditional IRA to Roth IRA.

1.2 there isn't question 'Choose Not to Deduct IRA Contributions'. Is it normal?

2. On my 2021 return to enter the 1099-R distribution/conversion

1.1 for #8, there isn't question about 'What Did You Do With The Money'. But there is 'Tell us if you moved the money through a rollover or conversion' with 4 options.

1. Generally, you will find the value on your end-of-the-year statement. Please enter this value for the “Tell us the value of all of your traditional IRA accounts”. Yes, it can be normal that you do not get the question “Choose Not to Deduct IRA Contributions”. 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 that it isn’t deductible because of your income and then a screen saying $0 is deductible

2. Yes, you will select b) I converted some or all of it to a Roth IRA, and then a) Yes, all of this money was converted to a Roth IRA.

@ VincentSun

Thank you.

After I enter the 1099-R distribution/conversion, the Federal Tax Due is increased by around $3K  ($12,000 contribution to IRA for 2 years). But the money I transfered to IRA is from my checking account which is purely after tax. Why do I need to pay for extra tax here? Is that normal? or do I enter anything wrong? 

Was the value of your traditional/SEP/SIMPLE IRAs on December 31, 2021, more than $0 (you had pre-tax funds left in the account)? 

 If yes, then the pro-rata rule applies and each conversion/distribution will have a taxable and nontaxable part. You can see the remaining basis on line 14 of Form 8606, this basis can be carried forward. Therefore each distribution/conversion in the future will have a taxable and nontaxable part until the basis is all used.

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.

@VincentSun

I have a very very similar situation if not the same. Just would like the clarify. My 1099-r is for $12000 because I made after tax contributions in 2021 for both 2021 and 2020. But when I enter the 1099-r for each year (amend for 2020) I am entering it as if I received a 1099-r for each year one for $6000, right? So I am entering as income and deducting it with the steps mentioned below for current 2021 and amended 2020 taxes. 

No, you enter the  2021 Form 1099-R only on your 2021 tax return.  

You will have to make sure that you have entered the nondeductible traditional contribution for 2020 on your 2020 tax return. Then TurboTax will create a 2020 Form 8606 with the basis on line 14. This basis will be entered on your 2021 tax return.

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 2020 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 1099-R conversion (only on your 2021 tax return): 

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"
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 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

@Jenny011

Thank you! This is helpful. Just to confirm, I am entering the back door for 2020 as income then deduct per the guidance… for 2020 I will not be entering any 1099-r forms. Then for 2021, I will import the full 12000 but only report that contributed 6000 in 2021 even though 1099-r has a total of $12000. Is this correct??

@DanaB27 

Yes, you will enter the $6,000 nondeductible traditional IRA contribution for 2020 on your 2020 tax return with the steps above. 

Yes, you will enter the $6,000 nondeductible contribution for 2021 on your 2021 tax return. You also enter the $6,000 basis from 2020 Form 8606 line 14 when TurboTax asks about a prior-year basis. Yes, you will import the Form 1099-R with the full $12,000 on your 2021 tax return.

@Jenny011

Thank you so much!!! 

@DanaB27 

The value of my traditional IRAs on December 31, 2021 is $0. And it is a purely clean account which only has after tax funds. So I don't understand why extra tax is required for that. Or I might enter something wrong in certain step? Thank you.

If your value of all your traditional, SEP, and SIMPLE IRAs is $0 on December 31, 2021, and had no earnings then line 4b of Form 1040 should be $0. 

On Form 8606 you have on line 1 $6,000, line 2 $6,000, and line 5 $12,000, correct?

@VincentSun

Hi @DanaB27 ,

Mine looks like this. Somewhat different than as described above. Did I do it wrong?? 

8606- line 1= $6000

line 2- $6000

line 14- $12,000

all other lines are $0 or blank 

1050 line 4b has the script ROLLOVER but is indeed $0. 

does this sound accurate to you? 

Yes, it seems you selected the wrong option when you answered the follow-up questions after entering your Form 1099-R. 

You selected rollover you need to select that you converted the funds.

For TurboTax Online:

1. Enter the information from your 1099-R
2. 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”
3. Confirm that you converted all of the $12,000 to Roth

For TurboTax Desktop/Download:

1. Enter the information from your 1099-R
2. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
3. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the $12,000 next to "Amount converted to a Roth IRA account"

@Jenny011

Thank you @DanaB27 … that is exactly what I did wrong. Darn, I will need to amend it once it is accepted. 

do I enter $6000 for 2021 for amount converted? It is asking how much of the $12000 I moved to an IRA, 401k or other retirement account. Or can I put all $12000 here and not have to worry about amending 2020 taxes..? (Wishful thinking here)  

also, how do I amend my 2020 taxes? I no longer have the 2020 software. 

Sorry! I do see you said to put down $12000 for the conversion amount. 

does it negate me having to amend 2020 tax returns? Or is that still required? 

I already filed.. will I need to wait until it is accepted to amend for 2021 as well? 

thank you so much!!! 

@DanaB27 

Yes, you will still have to amend your 2020 tax return to enter the nondeductible contribution and create the 2020 Form 8606 with the $6,000 basis on line 14.

Yes, you have to file a 2021 amended return to make changes. But please wait until your refund or payment is processed. Please be aware that you can e-file your 2021 amended federal tax return, but most states require amendments to be printed and filed by mail.

@Jenny011

I am not expecting a refund (I can only dream) but I have amended as it was accepted this morning. 

Form 8606

line 1- $6000

line 2- $6000

line 3- $12000

line 5- $12000

line 13- $12000

line 16- $12000

line 17- $12000

1040

line 4b no longer has the rollover printed. Is this accurate now?? 

you are a godsend @DanaB27 

Another question, when I am mailing in my amended return. Do I only mail the 1040x and updated 8606 forms? Or do I need to mail the entire packet to include all the forms? 

@DanaB27 

Yes, your Form 8606 and the entry on Form 1040 line 4 looks correct.

The 2021 amendment you can e-file. 

For the 2020 amended return you will mail Form 1040-X, the new Form 1040, and Form 8606.

@Jenny011

Thank you Dana! 

turbotax is not giving me the option to efile my 2021 amended tax return. 

For 2021, can I mail the 1040x and updated 8606  forms only as well? Or do I need to send the entire packet?

amended 2020- I will mail per your guidance 1040x with updated 8606 forms only

Do I need to do anything with state for these amended tax returns for both 2020 and 2021? 

I did not efile state and have not mailed it either. Should I mail the original or the amended version? I do not believe anything has changed but the name of the document itself and a few line items bc it is an amended version now. Please advise. Thank you much!!! 

@DanaB27 

Yes, you will mail Form 1040-X, Form 8606, and the new Form 1040

Yes, you will use the new version for filing your 2021 state return.

For the 2020 amended state return, you can check if anything changes on your state return and if yes you will have to file it too.

@Jenny011

What is “the new form 1040”? 

do I also need to attach my w-2? To the amended federal return? 

also, just to confirm, for state, since I have already amended and have not mailed in the original, I should just mail the amended state only? Is that correct? 
@DanaB27 

Oh wait! I see it.. there are 2 pages for 1040x and another 2 behind it for form 1040. I’m guessing this so the “new form 1040” you are referring to. 

ok, so next question is.. do I need to attach w-2? 

also, when I amend for 2020 and state is not affected.. no refund or payment. Will I need to resend the amended state as well?

just to confirm- for 2021 state, I am sending in only 1, amended version and will disregard original version altogether. Is this correct? 

@DanaB27