How to enter a back-door Roth with a balance already in the IRA

[dhannum]

In 2023, we did a back-door Roth, contributing 6500 into the IRA and then converting to a Roth. But, what's interesting is that the account already had a balance of about $13k before that, so that $13k was converted and I would owe taxes on it. We are over the income limit, hence the back door Roth.

The 10990-R lists the whole $19500 as a contribution and rollover which is correct (distribution code 2, etc). And it went into Turbo Tax as me paying tax on the full $19500. I later noticed that I should not have paid tax on the $6500 that was contributed this year because that is post tax money. I believe this should be relatively easy to fix on form 8606, adjust the cost basis, but I don't see how to do that with TurboTax.

I originally put it in as all taxable (not quite sure how). But now if I amend and I follow this (https://ttlc.intuit.com/turbotax-support/en-us/help-article/retirement-benefits/enter-backdoor-roth-...) it makes the whole thing not taxable (also wrong). I can't figure out how to make some taxable and some not. I have called Turbo Tax support twice and they didn't know either. I know if I had paid for the "do it for me" I'd be good now, but it's too late to sign up.

Anybody know what I'm missing?

[fanfare]

If you start your adventure with a non-zero traditional IRA.

it is not possible to do a tax-free Backdoor Roth contribution.

you are supposed to take the non-deductible election on the $6,500.

That gives you a basis of $6,500 on Form 8606.

You converted your entire IRA to Roth, Such an action cannot be reversed.

@dhannum 

[fanfare]

"now if I amend"

If you filed and took a deduction for your $6,500 don't bother to amend it won't help you

If you did not take a deduction, then when you amend file Form 8606 with $6,500 on Line 1

( you do this by telling TurboTax you want to elect non-deductible )

That will give you a refund of the tax on the $6,500.

@dhannum 

@dhannum 

[Opus 17]

This is what is supposed to happen.

First, you enter the IRA contribution in the IRA section on the deductions and credits page.  You may be told that you can't deduct it, or you may be asked if you want to take a deduction, in which case you say "no."

Then, enter the 1099-R showing the full withdrawal.  Turbotax asks what you did with the money and you say you converted it to a Roth IRA.

Both of these facts go on form 8606.  You should have a form 8606 as part of your 2023 tax return that has the following information:

Line 1 (current non-deductible contributions) $6500

Line 2 (prior non-deductible basis) $0

Line 8 (conversions) $19,500

Line 11 (non-taxable conversion) $6500

Line 15c (taxable amount) $13,000.

If line 1 does not show your current (2023) non-deductible contribution, then you entered it wrong or didn't enter it in Turbotax.  You can amend your return to change your answers, and report the non-deductible contribution.  If line 1 does show $6500, and line 15c shows $13,000, then you paid the correct tax on the conversion. 

[dhannum]

Thank you! This worked perfectly and was easily fixed. Not sure why it seemed so hard before.