How do I keep from gaining a tax liability in the Turbotax when I enter a 1099R distribution that was actually a recharacterization/conversion?

[dr-rob-poindexte]

I contributed the max nondeductible to a traditional IRA on 4/16/18 for tax year 2017.  I contributed the max nondeductible to a traditional IRA on 12/07/18 for tax year 2018.  I requested conversion for both to a Roth IRA.  On 12/12/18 they distributed the funds from both contributions to the traditional IRA which generated a 1099 reflecting both years.  When I enter into the software I am still incurring a tax liability and I need guidance to remove that liability.

[macuser_22]

What do you mean "I requested conversion for both to a Roth IRA" and "On 12/12/18 they distributed the funds from both contributions to the traditional IRA..."?

Did they convert it to a Roth or distribute it to you?

[dr-rob-poindexte]

My financial advisor advised me to contribute to a traditional IRA and they would do the back door Roth IRA.  I did that for both tax years 2017 and 2018.  The contributions were both made in the same year so they converted both contributions at the same time.  I received a 1099R reflecting a distributions.  I have never had a 1099R when they have done this in other years.

[macuser_22]

You cannot convert a Traditional IRA to a Roth IRA without a 1099-R that is reported on your tax return.    You also cannot make a non-deductible Traditional IRA contribution that is not reported on a 8606 form that is part of your tax return.

Any distribution form a IRA must be reported in a 1099-R form.

If you failed to file the 1099-R and 8606 forms in the past, then you probably must file amended past tax returns.

[macuser_22]

Assuming that you mean the following:

This so-called “back-door Roth” method ONLY works if you have NO OTHER Traditional IRA accounts.  If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself.  Only if you started with NO Traditional, SEP & SIMPLE IRA and ended up with a zero amount in ALL Traditional, SEP & SIMPLE IRA accounts will this Roth conversion not be taxable.

First you must enter your Traditional IRA contributions (if there were 2018 contributions).

IRA contribution
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),,
Retirement & Investments,
Traditional & Roth IRA contribution.

Be SURE to answer the follow up that the are choosing to make this contribution NON-DEDUCTIBLE - if that screen comes up. (DO NOT say that you moved (recharacterized) the money to a Roth) – this is a conversion, not a recharactorazition.

Then enter the 1099-R that shows the distribution.

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),,
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

Answer the follow-up questions answer the question that you moved the money to another retirement. The screen will open up with choices of where it was moved. Choose you converted it to Roth IRA.

When asked if you have made any non-deductible contributions say " "yes" if you did then enter the non-deductible contributions made for tax years before 2018.     (Usually zero unless you also made a 2017 or earlier non-deductible contribution. If you do have prior year basis then enter the last filed 8606 line 14 value.).

Enter the 2018 year end value of your Traditional IRA a "0" (zero) - if it is in fact zero - this tax free Roth conversion will not work if it is not zero.

[If you had any other Traditional IRA at the end of 2016, then the nondeductible "basis" must be pro-rated over the current distribution and the total IRA value and only a portion of the Roth conversion will be non taxable and part will be taxable, with the remaining non-deductible basis carrying forward for future distributions. You can never only withdrew the nondeductible basis as long as the IRA exists and has a value more than zero.]

The non-deductible amount of your contribution will be subtracted from the taxable amount of the conversion on then 8606 form and enter on line 4a of them 1040 form and a zero taxable amount on line 4b if you did it right.

Also see this TurboTax FAQ:
https://ttlc.intuit.com/questions/4350747-how-do-i-enter-a-backdoor-roth-ira-conversion