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jtip1025
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How do you input a Roth IRA Conversion/Nondeductible IRA contribution where you don't get taxes on it? It's showing as taxable, but I have marked that it was converted.

We have an IRA that has a zero balance. Every year we make a non deductible IRA contribution, then convert to Roth IRA. It shouldn't be taxable at all. However it reduces our refund which means it's showing as taxable. I have it marked that we converted this to a Roth IRA, but it's still reporting as taxable for some reason. Any guidance would be appreciated.
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How do you input a Roth IRA Conversion/Nondeductible IRA contribution where you don't get taxes on it? It's showing as taxable, but I have marked that it was converted.

jtip1025,

 

Congratulations on your smart move to own just a single traditional IRA in order to make backdoor Roth conversions virtually painless.  (Do check if the traditional account has earned any interest, dividend, etc. between the time of contribution and the time of distribution as that would incur a small amount of taxable income.)  TurboTax has a FAQ on how to perform this operation.  The portion for online TurboTax reads:

 

Step 1:  Enter the Non-Deductible Contribution to a Traditional IRA

  1. Open your return if it’s not already open.
  2. Inside TurboTax, search for ira contributions and select the Jump to link in the search results.
  3. Select Traditional IRA on the Traditional IRA and Roth IRAscreen and Continue.
  4. Answer Yes to Did you Contribute To a Traditional IRA?
  5. Answer No to Is This a Repayment of a Retirement Distribution?
  6. On the Tell Us How Much You Contributed screen, enter the amount contributed and continue.
  7. Answer No on the Did You Change Your Mind?
  8. Depending on your situation, answer the remaining questions.

Step 2:  Enter the Conversion from a Traditional IRA to a Roth IRA

  1. Inside TurboTax, search for 1099-r and select the Jump to link in the search results.
  2. Answer Yes on the Your 1099-R screen and continue.
    • If you land on the Your 1099-R Entries screen, select Add Another 1099-R.
  3. Select how you want to enter your 1099-R (import or type it in yourself) and follow the instructions.
  4. Answer No to Did You Inherit the IRA from (payer)?
  5. Answer I moved the money to another retirement account (or returned it to the same retirement account) on theWhat Did You Do With The Money From (payer)?
  6. Next, choose I converted all of this money to a Roth IRA account.
  7. Continue answering questions until you come to the Your 1099-R Entries screen.

To check the results of your backdoor Roth IRA conversion, see your Form 1040:

  1. On the left side of your screen, select Tax Tools, then Tools.
  2. Under Tool Center, select View Tax Summary.
  3. On the left side of your screen, select Preview my 1040.
    • Your backdoor Roth IRA amount should be listed on 1040 Postcard, Line 4  as IRA distributions.
    • Taxable amount should be zero unless you had earnings between the time you contributed to your Traditional IRA and the time your converted it to Roth IRA, then the earnings would be taxable.
    • Schedule 1, Line 32 IRA deduction, should be blank.
  4. Select Back on the left side of your screen to return to where you left off in TurboTax.

How do you input a Roth IRA Conversion/Nondeductible IRA contribution where you don't get taxes on it? It's showing as taxable, but I have marked that it was converted.

if you do this every year, surely you know how it works.

You should be helping us !

 

what's different this time ?? if it's taxable, that means you had only a partial basis, not a 100% basis. That will happen if your IRA went up in between the two events.

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