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Ed145
New Member

How do I enter a Roth conversion from a nondedictable Traditional IRA so that Form 8606 shows the correct basis?

 
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DanielV01
Expert Alumni

How do I enter a Roth conversion from a nondedictable Traditional IRA so that Form 8606 shows the correct basis?

It depends.   From a tax standpoint, the amount of your contributions from your nondeductible IRA are not taxable when you roll it over (or convert it).  However, any growth (interest or otherwise) is taxable.  But, to be sure, the entire amount of the distribution is not taxable, so there are some entries to make in the system.  Make sure you do the following on the 1099-R entry screen:

  1. Enter in the information as reported on the 1099-R for this IRA in the main portion of the screen (box 2a should be blank, and "taxable amount not determined" should be checked, and box 7 probably has a code 2).  Hit Continue.
  2. Next screen says Good News: You Don't Owe Extra Tax on This Money (this means there's no penalty, but the income still needs to be reported correctly to be removed from taxable income).  Hit Continue.
  3. Next screen:  Did You Inherit the IRA from This Payer?  Probably No.  Hit Continue.
  4. Next screen asks What Did You Do With The Money From This Payer?  First select I moved the money...and then I converted all of this money to a Roth IRA account.
  5. After a few screens relating to Disaster Payments, you come to a screen asking Any Nondeductible Contributions to Your IRA? Click YES and Continue.  
  6. Enter how much was your total Basis on December 31, 2017.  This is the amount of total nondeductible contributions you've made throughout the years.  This information is on Form 8606 from your 2017 tax return.

You will still have a few questions after this, but you will see the portion of your distribution that was from your nondeductible contributions will have been excluded from your taxable income.

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View solution in original post

1 Reply
DanielV01
Expert Alumni

How do I enter a Roth conversion from a nondedictable Traditional IRA so that Form 8606 shows the correct basis?

It depends.   From a tax standpoint, the amount of your contributions from your nondeductible IRA are not taxable when you roll it over (or convert it).  However, any growth (interest or otherwise) is taxable.  But, to be sure, the entire amount of the distribution is not taxable, so there are some entries to make in the system.  Make sure you do the following on the 1099-R entry screen:

  1. Enter in the information as reported on the 1099-R for this IRA in the main portion of the screen (box 2a should be blank, and "taxable amount not determined" should be checked, and box 7 probably has a code 2).  Hit Continue.
  2. Next screen says Good News: You Don't Owe Extra Tax on This Money (this means there's no penalty, but the income still needs to be reported correctly to be removed from taxable income).  Hit Continue.
  3. Next screen:  Did You Inherit the IRA from This Payer?  Probably No.  Hit Continue.
  4. Next screen asks What Did You Do With The Money From This Payer?  First select I moved the money...and then I converted all of this money to a Roth IRA account.
  5. After a few screens relating to Disaster Payments, you come to a screen asking Any Nondeductible Contributions to Your IRA? Click YES and Continue.  
  6. Enter how much was your total Basis on December 31, 2017.  This is the amount of total nondeductible contributions you've made throughout the years.  This information is on Form 8606 from your 2017 tax return.

You will still have a few questions after this, but you will see the portion of your distribution that was from your nondeductible contributions will have been excluded from your taxable income.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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