I am doing a backdoor Roth IRA which requires first adding the contributions to a regular IRA and then adding form 1099-R to indicate a conversion.

[taxsavvy]

My problem is when i am trying to add a Regular IRA.

The Regular IRA Contribution has been made with after  tax dollars. Hence, this contribution should not increase my tax liability. However, in Turbotax it does.  

The Conversion to Roth was also done the very same day, hence no tax liability should accrue there either.

How can i enter my Regular IRA Contribution indicating after tax dollars so that turbotax does not increase my tax liability?

[DanaB27]

Please make sure you that you make the contribution to the traditional IRA nondeductible (step 10):

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
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 contributions before this tax year.
9. If you had a basis in the Traditional IRA before then enter the amount.
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

To enter the 1099-R distribution/conversion: 

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Click "Continue" and enter the information from your 1099-R
5. 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”
6. On the "Your 1099-R Entries" screen click "continue"
7. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
8. Answer the questions about the basis

You can verify your entry on line 4 on Form 1040:

1. Click on "Tax Tools" in the left menu
2. Click "Tools"
3. Click "View Tax Summary" in the Tool Center window
4. Click on "Preview my 1040" on the left

[taxsavvy]

I don't qualify for an IRA Deduction (Income Limits) and hence i can't enter anything for IRA Deduction.   I am not looking for one either. 

The situation here is different. The contribution to Regular IRA is being made with after tax dollars. Hence, Turbotax should not be adding any more tax liability for contribution to Regular IRA.

The software is incorrectly assuming that the Roth IRA deduction has already been taken and adding tax liability. 

[DanaB27]

Just to clarify, you entered your traditional IRA contribution following the steps above and that reduced your refund/ increased your tax due? (If you cannot deduct any amount because of your income then you will just get the message that it is nondeductible instead of the instructions in step 10)

Did you get any warning about an excess contribution? That could trigger an additional 6% tax penalty. Please be aware the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:

• $6,000 ($7,000 if you're age 50 or older), or
• If less, your taxable compensation for the year

Also, to verify you did not enter the conversion as a contribution? The conversion will only be entered in the 1099-R section.

[taxsavvy]

I am filing married filing jointly. 

Without adding any IRA Contributions, our federal tax due is $837. As soon as i add Regular Contribution for myself and my wife (Total of $12000, $6000 each), the tax liability increases to $$3200. 

Since the IRA contribution is being made with after tax contribution, i don't expect the tax liability to increase. 

One of the things that could be going wrong is that i am uploading the PDF 1099-R from our bank, which automatically populates Turbotax.  Apparently, the bank has issued 1099-R suggesting that there has been a distribution of $6000 (Box 1) and all of $6000 is taxable (Box 2a).  This doesn't appear to be reported correctly. I will reach out to them to get this corrected. 

[taxsavvy]

This is a very weird behavior in Turbotax and should be treated as a software bug.

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”

The above question is a very important part of Backdoor Roth IRA but it never shows up when uploading the pdf copy of the tax form from the Bank. It only comes up when navigating through the questionnaire and filling out 1099-R information manually in turbotax?

Can you please confirm if this is acknowledged as a product defect?

[sp353]

I don't think its still fixed. 

my federal tax due of 300$ goes to 2400$ as soon as I add 1099 R details ( post-tax 6000 $ in traditional IRA completely converted to Roth IRA, for which i should not owe any taxes). My tax liability increases by more than by 2000$ for just adding 6000$ 1099r details on which I have already paid taxes.

Please fix this bug.

(It doesn't matter if I  enter the details by myself as well, I have followed all the instructions as above, its not working)

[DanaB27]

Please be aware, for the backdoor to work correctly you need to empty your traditional IRA each year since earnings will be taxable.

If you made the $6,000 contribution in 2021 then please enter the contribution first:

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
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. If you had a basis in the Traditional IRA before then enter the amount.
9. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

To enter your 1099-R conversion (if you had prior nondeductible contributions left in the IRA pay special attention to steps 6 and 7):

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 "Your 1099-R Entries" 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 and value

@sp353 

[Opus 17]

---

@sp353 wrote:

I don't think its still fixed. 

my federal tax due of 300$ goes to 2400$ as soon as I add 1099 R details ( post-tax 6000 $ in traditional IRA completely converted to Roth IRA, for which i should not owe any taxes). My tax liability increases by more than by 2000$ for just adding 6000$ 1099r details on which I have already paid taxes.

Please fix this bug.

(It doesn't matter if I  enter the details by myself as well, I have followed all the instructions as above, its not working)

---

If you have a traditional IRA already, the backdoor Roth doesn't work.  This is per IRS regulations.  What happens is this:

Suppose you have a pre-tax IRA worth $50,000 and you make a $6000 non-deductible contribution.  If you then try to convert $6000 to a Roth, the amount is pro-rated.  In this example, 10.7% of your IRA is non-deductible, so 10.7% of the conversion is non-deductible (not taxed) and the other 89.3% of the conversion comes from your pre-tax balance, and so that is subject to regular income tax as a Roth conversion.

A backdoor Roth only works if you have zero balance in pre-tax IRAs, or if you are prepared to convert the entire pre-tax IRA to a Roth and pay tax on the pre-tax amount.  And note that all your IRA balances are aggregated for this rule.  You still can't do a backdoor Roth if you have a pre-tax IRA at bank 1, and you try to do the non-deductible IRA to Roth conversion at bank 2.  For purposes of the Roth conversion rule, all your IRA balances are aggregated. 

[danbez]

After struggling with this same problem for hours, I found this post. If you follow DanaB27 instructions you will get the right results: your after tax contribution to T-IRA (6000 or 7000) won't impact what your federal tax due.

Now it's ridiculous that Turbotax hides this step to the point where we need to keep searching for answers, find an expert who provided the proper steps, which involves a manual search on the help bar to find the entry point. I wonder how many people over paid their taxes due to this issue.

[t-tsocks]

I agree. I can't believe this is such a burden to get done. It probably took me 4hrs to find this post.

[t-tsocks]

I continuously get "Income Too High To Deduct an IRA Contribution" before I can select  “Yes, make part of my IRA contribution nondeductible”. What should I do? This is the worst experience EVER with Turbotax.

[FangxiaL]

Click on Continue on the screen that says Income Too High to Deduct an IRA Contribution.

Here are the two screenshots:

@t-tsocks

[t-tsocks]

Thanks for the answer FangxiaL.

I wish it was that easy. The problem is that window "Choose Not to Deduct IRA Contributions"  as displayed on your second screenshot does not appear for me. 

[DanaB27]

Yes, you will not get the screen “Choose Not to Deduct IRA Contributions” if you have a retirement plan at work and are over the income limit. TurboTax will make it nondeductible automatically and you only get a warning and then a screen saying $0 is deductible. TurboTax will create Form 8606 for you to report your basis. You are done with entering your nondeductible contribution.
 

@t-tsocks