I contributed $5,500 to a non-deductible IRA in 2014. My income is too high to claim a deduction for the contribution. I converted it to Roth IRA, also in 2014. Turbo tax taxes me again on the $5,500 that was after tax money. I found instructions on how to do it with the on-line version (http://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html) but I am using a version installed on my computer.
The process is the same on the Desktop version of TurboTax ... just stay in the Step-By-Step mode and don't use the Forms mode.
Doing a "backdoor Roth" in TurboTax is a 2-step process.
First, go to Federal Taxes > Deductions & Credits > I'll Choose What to Work On > Retirement and Investments > Traditional and Roth IRA Contributions. Enter the contribution to the Traditional IRA (TIRA) that you made. Depending on your income and if you have a retirement plan at work, TurboTax will either tell you that your contribution is not deductible or it will ask you "Do you want to make your IRA contributions nondeductible?"
Once TurboTax knows that your TIRA contributions are nondeductible (that is, you have a basis in your TIRA), then enter your 1099-R at Federal Taxes > Wages & Income > I'll Choose What to Work On > Retirement Plans and Social Security > IRA, 401(k), Pension Plan Withdrawals (1099-R). For a Roth conversion, the 1099-R usually has a Distribution Code 2 in Box 7. That means it is an early distribution but an exception applies so there is no penalty.
To check that the right results show, look at your 1040 form. There should be no entry on Line 32 for IRA deduction. The Box 1 amount from your 1099-R should appear on Line 15a of your 1040, but Line 15b should be zero.
Hi, I found another way around this problem. When entering the 1099-R data (or after importing it) in Box 7, I added code “N-Recharacterized IRA contribution made for 2014 and recharacterized in 2014”. This step took the amount out of the taxable category. I'm going with this solution, although the form from the financial firm did not have the Box N checked, that is what actually happened, so I can defend it.
But after seeing the response from 2020hindsight, I went back and followed the original instructions from TurboTaxForrest. That worked, but it took a while to find a problem which was on the page "Tell us the Value of Your Traditional IRA". All three values on that page have to be zero.