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Level 2

Solved

how to report backdoor roth - step by step

Forum|Forum|6 years ago
March 15, 2020
41 replies
154 views

I'm trying to figure out how to report my backdoor roth conversion through the step by step menu. I entered the 1099-R under the wage and income section. I answered the question about taking the distribution and converting it fully to a roth ira.

Now i'm in the deductions and credits section. Under the IRA section it already shows my contribution from the wage and income section. Do I need to go in there and add my roth ira? I'm assuming now because I technically contributed to a traditional ira? If i check the roth ira then it tells me i over contributed. When i go through the forms i get even more confused because some of the sections where it mentions conversion to a roth are blank.

please help.

Best answer by dmertz

Sorry I meant it this way :

I made 2020 year contribution in 2021 ( as you can contribute for 2020 till 2021)

And then I contributed for 2021 year in March 2021 as well.

The traditional IRA contribution that you made for 2020 in 2021 is reportable on your 2020 tax return. Any Roth conversion that you did in 2021 is reportable on your 2021 tax return.

If you similarly made a traditional IRA contribution for 2019 in 2020 and you did a Roth conversion of that money in 2020, the traditional IRA contribution for 2019 was reportable on your 2019 tax return and the 2020 Form 1099-R reporting the distribution that was converted to Roth in 2020 is reportable on your 2020 tax return. Any amount that appeared on line 14 of your 2019 Form 5329 transfers to line 2 of your 2020 Form 8606 to be used in determining the taxable amount of your 2020 tax return.

KarenM90

Level 11

Here are the step by step instructions to enter your Back Door Roth contribution.

I recommend that you delete whatever you have entered and follow these step by step.

How to Enter a Backdoor Roth

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chuckersAuthor

Level 2

Thank you! According to your link everything checks out when I verify the 1040:

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

Select Forms in the upper-right corner of the screen.
Select Form 1040 from the left menu.
Use the scroll bar to find:
- Line 4a IRAs Distributions. Your backdoor Roth IRA amount should be listed.
- Line 4b Taxable amount should be zero unless you had earnings between the time you contributed to your Traditional IRA and the time you converted it to Roth IRA.
Select Schedule 1 from the menu in the left side of the screen. Line 19 IRA deduction should be blank.
To return to where you left off in TurboTax, select Step-by-Step in the upper-right corner of the screen.

erndisney

Level 2

Those results don't seem to work on the Home and business copy of Turbo Tax. Is here another way of doing it in this copy of the software. Nothing matches when I get into the 1099-R looks completely different.

Ern

JohnB5677

Level 15

A backdoor Roth IRA allows you to get around income limits by converting a Traditional IRA into a Roth IRA. Contributing directly to a Roth IRA is restricted if your income is beyond certain limits, but there are no income limits for conversions.

Doing a backdoor Roth conversion is a two-step process.

TurboTax Online

TurboTax CD/Download

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thidz

Level 2

I followed the instructions on the link but turbotax keeps telling me that box 2a (taxable amount) cannot be 0 if line 4 (federal income tax withheld) is 0 ("no prior year excess traditional IRA contribution) and won't let me efile. Also the turbotax website did not fully match the instructions in the link so not sure if there have been updates since last year. Do you have any thoughts/ideas on why this may be coming up? Thanks!

Anonymous

I contributed to 2019 traditional IRA in Feb 2020 and converted it to Roth after 2 weeks.

Additionally, I also contributed for 2020 traditional IRA in March 2020 and converted it to Roth after 2 weeks.

As these happened after Dec 31st 2020, I haven't received any forms for 2020 year.

How should I enter this scenario in Turbotax ?

Please help ! Thanks in advance !

dmertz

Level 15

Shahvatsal92, your post is self-contradictory. You said both that the Roth conversions occurred in early 2020 and that these Roth conversion occurred after December 31, 2021. Both can't be true.

Anonymous

Sorry I meant it this way :

I made 2020 year contribution in 2021 ( as you can contribute for 2020 till 2021)

And then I contributed for 2021 year in March 2021 as well.

Sika

Level 2

In my case, I contributed to a roth IRA account first before recharacterizing to a traditional IRA to do the backdoor IRA. All of this was done in Feb 2021 for 2020 tax season so I don't have 1099 forms yet. In reporting with a downloaded version of turbo tax, what parts of this step by step process should I do differently because my form 8606 and 1040 seem to be riddled with errors at the moment. I would greatly appreciate some help.

macuser_22

Alumni - Champ

@Sika wrote:

In my case, I contributed to a roth IRA account first before recharacterizing to a traditional IRA to do the backdoor IRA. All of this was done in Feb 2021 for 2020 tax season so I don't have 1099 forms yet. In reporting with a downloaded version of turbo tax, what parts of this step by step process should I do differently because my form 8606 and 1040 seem to be riddled with errors at the moment. I would greatly appreciate some help.

The proper way to report the recharacterization and earnings which is to enter the 2020 IRA contribution in the IRA contribution interview section and then say yes to "Did you switch from a Roth to a Traditional IRA - recharacterize".

The amount The amount of the original Roth contribution must be entered - not any earnings or losses.

Then TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharactorized.

There is no tax or penalty on the before-tax earnings since the earning were simply switched into the recharactorized account.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

Say you do not want to deduct it if the question comes up to be an after-tax contribution reported on a 8606 form (line 1 & 14) as a "basis" in the Traditional IRA that will reduce the tax of future distributions.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

Sika

Level 2

Thank you so much.

So when asked about total contributions to traditional IRA account, the correct answer is 'zero' then since I technically did not contribute to the traditional IRA account but 'recharacterized' funds to that account only to be transferred back to the roth IRA account. Is this correct?

I tried the alternative by putting the amount I 'received' from the recharacterized roth account and my contribution doubled requiring me to pay 6% tax on the excess further down the line. So it seems because of my route to the backdoor roth, my traditional IRA contribution is supposed to be 'zero'. right? Thanks

TXW

Level 2

I do this on Turbotax Premier (and check the 1040 and Schedule 1 as advised) and it then says that "You Have an Excess Roth Contribution" and because your contrubtion isn't permitted, it's considered an excess contribution of $7,000" and the next screen says "You Currently Have a Penalty", WTF?