Hi,
For the year 2018, I made two $5500 contributions to my traditional IRA, both before March 2018. First one for 2018 and second one for 2017. I did not make any such contribution for 2017, so there no excess.
Then I converted over both $5500 amounts to my Roth IRA, essentially doing the backdoor Roth.
So my 1099-R has $11000 as both Gross Distribution and Taxable Amount.
I followed this article
https://ttlc.intuit.com/questions/3582070-backdoor-roth-ira-contribution
But in the end it says I have a penalty of $330, so 6% of $5500. No increase in taxes, so that's good.
Out of that 11000, I think there has to be a way to tell all of that was not for 2018, but was for 2017 and 2018.
How do I solve this problem?
this article is not helping, can someone please clarify the steps of making a 2017and 2018 contribution in the same year. The article steps, which I followed, do not work and I get a penalty and a statement that says I do not qualify for a roth.
the article did not help OP either,but if you study the followup comments (from me) you will get the gist of what has to be done
It's easier to do this with cd/downlaod, not Online.
OR
search the forum there are hundreds of posts on this topic
Under deductions section, entered the 2018 nondeductible traditional IRA contribution of $5,500.
You said manually enter the 1099-R with the $11,000 distribution/conversion. Will my manual entered 1099R be exact copy of 1099R received from Fidelity? If not what will be differences? Please clarify?
you have 5,500 prior years basis (or should have) and you have 5,500 contribution this year,
so you are converting 11,000. your prior years basis should drop to zero.
Your 2017 contributions should have been entered on your 2017 tax return and if non-deductible would have produced a 2018 8606 form with the carry froward non-deductible basis in box 14.
Your 2018 non-deductible Traditional IRA contributions are entered as 2018 contributions in the IRA contribution section which will produce a 2018 8606 form with the 2018 contribution on line 1.
When you enter the 2018 1099-R the interview will ask for prior years non-deductible contributions. You enter the 2017 8606 box 14 amount that will go on line 2 of the 2018 8606 form. Line 3 will be the total of line 1 (2017) and line 2 (2018) so that the total of both non-deductible contribution will offset the taxable distribution on lines 6-18. That depends on line 6 being zero total Traditional IRA 2018 year end value - if a Traditional IRA account still existed then only part of the distribution will be tax free.
" I made two $5500 contributions to my traditional IRA, "
you must indicate to turbotax that you elected both these contributions were non-deductible.
then your problem will go away.
"but was for 2017 and 2018."
you only enter the $5,500 contribution for 2018.
The 2017 contribution is considered "prior years basis".
So in the "Tell Us How Much You Contributed" section of "Deductions and Credits", I should put only 5500 for the question "Your total 2018 traditional IRA contributions"? But when do that I am taxed for the additional 5500 amount.
To solve this, in this section "Any Nondeductible Contributions to Your IRA?", I should say "Yes, I made and tracked nondeductible contributions to my IRA"?
Thanks
What should the value of this question "Total Basis as of December 31, 2017" should be?
Ok, looks like I finally solved this. For this section "Let's Find Your IRA Basis" and the field "Total Basis as of December 31, 2017", I have put 5500. This removes the additional tax. But the problem is I didn't file a Form 8606 last year. Can this be a problem? I didn't use Turbo tax last year for filing as I was a non-resident for tax purposes.
I don't think so. I'd just file it and ignore the 2017 8606. If there is an issue IRS will contact you and you can send it in.
Always print a copy of your completed tax return for your records, and review it carefully before e-Filing.
You will need it if you are audited by the IRS, or to amend because a TurboTax update changes your return.
OR to make sure you did a Roth conversion correctly
Thanks a lot for your input. For 2018 I'm not putting in more than $6000, not quite sure if I'll get 8606 this time I think. Actually I opened my both IRA accounts in 2018, so I'm doing it for the first time. Yep, I keep all my returns 🙂 I did consult a tax advisor while doing the conversion, so I should be good.
you will have a 2018 8606 that shows your "prior years basis" is now zero.
mark the answer if this was helpful to you.
Hello, I am still very confused what actions to take. I have the same problem. After following the steps, I still see the 6% penalty in my case. What shall I do?