How to report backdoor IRA in 2022?

[tianwaifeixian]

I contributed $6000 after tax money to my traditional IRA in 2022 and categorized all $6000 to Roth IRA. Here are my answers to the question in TT:

1. Did you contribute to a Traditional IRA? - Yes

2. Is this a repayment of a retirement distribution?- NO

3. Total 2022 traditional IRA contribution: 6000

    How much of the above total contribution for 2022 you contributed between 1/1/2023 and 4/18/2023: 0

4. How much of the $6000 you contributed to a traditional IRA for 2022 did you switch, or "characterize" , to a Roth IRA? Amount Switched from a Traditional IRA contribution to a Roth IRA contribution: 6000

5. Any excess IRA contribution before 2022? No

6. Any nondeductible contributions to your IRA? Yes
7. IRA Basis as of Dec. 31, 2021: Line 14 from form 8606
8. Attach an explanation- it says the IRA basis we transferred from 2021 is different from the basis entered. Not sure why. 

On this screen. it offers two buttons: "Prepare Explanation" and "Continue", I just clicked "Continue" and it told me that "your income is too high to contribute".

I have done similar things in the past couple of years and didn't have any problems like this. Can anyone help? 

Thank you!

[DanaB27]

Your step 4 is wrong. You made a conversion, not a recharacterization. For a recharacterization to Roth IRA, you pretend you never contributed to the traditional IRA and you get a Form 1099-R with code R or code N in box 7.

For the conversion, you will enter your Form 1099-R (code 1 or code 2) and answer the follow-up questions indicating that it was a conversion. 

If you entered the nondeductible traditional IRA contribution for 2021 correctly and didn't convert the fund to the Roth IRA until 2022 then your basis on line 14 of your 2021 Form 8606 should be $6,000 (assuming all your traditional, SEP, SIMPLE IRAs were empty before the contribution for 2021).

Please review the instructions below.

To enter the nondeductible contribution to the traditional IRA for 2022:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
10. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the 1099-R conversion: 

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
12. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[tianwaifeixian]

Thank you! I did forget the 1099-R. Now I entered the 1099-R info. After step 10, I got the screen asking me to Attach an explanation:  The IRA basis we transferred from 2021 is different from the basis entered.

I used TT for last year. I open the final PDF I saved (generated by TT2021). Line 14 is the number I used. I don't know why I keep getting this error message.

[DanaB27]

If you confirmed that the basis is correct as shown on line 14 of your 2021 Form 8606 then just enter "Entered basis from line 14 of the 2021 Form 8606" for the explanation statement.

Do you remember what number was carried over from 2021? And what is your line 14 basis on your 2021 Form 8606?

@tianwaifeixian 

[tianwaifeixian]

Yes. On 2021 Form 8606:

Line 1: 6000

Line 2: 17575

Line 3: 23575

Line 5: 23575

Line 13: 6000

Line 14: 17575

I entered 17575 and got that mismatch screen

@DanaB27 

[DanaB27]

To confirm, do you have nondeductible contributions left in the traditional IRA from prior years since you have such a high basis (didn't always convert the funds to Roth IRA)?

If you convert the nondeductible traditional IRA contributions each year to Roth (emptied your traditional IRA each year) then your basis should be used up (only exception if you had a loss before converting).

If you entered the same amount as carried over you shouldn't get that message.

@tianwaifeixian 

[tianwaifeixian]

I do not have any non-deductible left in traditional IRA since 2019. In 2019, I converted everything to Roth IRA. Since then (2020, 2021) I always contribute to IRA first with my after tax money and convert full amount to Roth IRA right away. So my traditional IRA balance is always 0 at the end of the year. Hope that helps.

When you say "your basis should be used up", does that mean that my basis should be 0? But it was not showing 0 on my last year 8606- not sure why?

Also, is it that I need to keep reporting my contribution to IRA (even if I converted all of them to Roth later) on 8606? Thank you!

[DanaB27]

Yes, if you always converted the full amount then your basis should have been $0. It seems something got entered wrongly on your Form 8606 in prior years since you have such a high basis amount on line 14. 

Yes, you always report the nondeductible traditional IRA contribution and then enter Form 1099-R for the conversion. 

You might want to review your entries in prior years. Please see the instructions below.

To enter the nondeductible contribution to the traditional IRA:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year (if you converted the full amount each year and the balance was $0 at the end of the year then this answer should be "No".
10. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the 1099-R conversion: 

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years (if you converted the full amount each year and the balance was $0 at the end of the year then this answer should be "No").
12. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

@tianwaifeixian 

[jay003]

I have an issue where I contributed $12,000 to the backdoor roth ira.  Since it was for 2 different years it meets the limit of $6,000 per year and should not result in me paying any additional taxes.  However, I do not have any idea on how to enter this so that it doesn't increase my taxes (as it should not).  I would appreciate it if someone shares the step by step instruction to do this.  Thanks in advance.

[DanaB27]

You should have reported a $6,000 nondeductible contribution on your 2021 tax return and have the 2021 Form 8606 with a $6,000 basis on line 14. This will get entered during the interview either in the IRA contribution interview (steps 8 and 9) or when you enter the conversion (steps 6 and 7).

To enter the nondeductible contribution to the traditional IRA:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed for 2022
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the Form 1099-R conversion: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" screen click "Continue"
6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

@jay003 

[jay003]

I appreciate that you have listed the step to do this; but, I should have mentioned that the version of the turbo tax that I am using is the desktop version.  The search button in that case brings up the help menu so I am not sure how to get started on what you said.  

Would you mind giving the instruction for the desktop version.

Thanks in advance 

[jay003]

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 

• I think you are asking me to go to the "traditional & roth IRA contributions section, is that correct?
• and then I select tradional IRA under my name?

1. Click on “Jump to IRA contributions"
2. Select “traditional IRA”
3. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
4. Enter the amount you contributed for 2022

• that would be $6000 in this case correct?

1. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
2. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.

• I don't see this question.  I see any excess IRA contribution before 2022, and I said NO

1. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)

• then it asks me if I have any nondeductible contributions to my IRA?  I chose Yes made and tracked nondeductible contributions to my IRA

1. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

then it says I go over the limit for ira deduction

To enter the Form 1099-R conversion: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R

• I entered this info and then it just asked if I inherit this IRA, I said no
• then it asks what did you do with the money from brokers name? I said moved the money to another retirement account (since I am moving this money into the roth ira account).
• then it asks which of the following applies: rolled over, or combination of rolled over and converting and I chose this option

1. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
2. On the "Review your 1099-R info" screen click "Continue"
3. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
4. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

it did not ask any of the above questions, just if this is related to HSA which it is not

[DanaB27]

Yes, if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning that you are over the limit for IRA deduction and then a screen saying $0 is deductible. You won't get the “Choose Not to Deduct IRA Contributions” screen. This is what you want and you can move on to the retirement section.

Please see the instructions below for TurboTax Desktop.

To enter the nondeductible contribution to the traditional IRA:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
10. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the 1099-R conversion: 

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
12. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

@jay003