I contributed after tax $7000 to traditional ira then converted it to roth ira then withdrawn it. How to remove $7000 taxable income of traditional ira distribution?

[shengwangster]

I contributed after tax $7000 to my traditional ira then converted all to my roth ira next day in 2024 then withdrawn this $7000 from my roth ira in march 2025 before deadline. The balance is like nothing happened. But I got extra $7000 taxable income of traditional ira distribution after filling all the information in turbotax. how can I correct it to remove this extra $7000 taxable income?

[ThomasM125]

For one thing, when you entered the IRA contribution, you needed to make sure you indicated that it was a non-deductible contribution. You also have to answer the questions correctly regarding the value or basis in your IRA both at the end of the previous and current year. 

When you enter the 1099-R form in TurboTax for the rollover of funds to the Roth IRA, you need to first indicate that you moved the money to another retirement account and that you did a combination of rolling over, converting or cashing out the money. Then, enter the amount converted to a ROTH IRA. Later on you need to indicate that you tracked non-deductible contributions to your IRA.

Later in the routine enter the basis (non-deductible contributions) of your traditional IRA at the end of the previous year, and later the value of your traditional IRA at the end of the current year.

[shengwangster]

@ ThomasM125

Thank you for your answer. I tried several times, still not working.

It seems the turbo tax income input part is fully from 1099-R which I can not change, I have my 1099-R 2a showing taxable income of $7000 and 2b Taxable amount not determined box checked. Then after I input all the information in turbo tax deduction part, it thinks this $7000 contribution is nondeductible by itself. Thus left net $7000 as my taxable income. In my case, I input in turbo tax my traditional IRA is 0 balance at the end of year 2023 and at the end of year 2024 as I only have two transactions, transferred in and out $7000 in one day in 2024, seems turbo tax can not translate such information I input in deduction part to remove the  $7000 Taxable amount in 1099-R 2a for my income as my 1040 line 4b still showing $7000. Can I manually adjust 1099-R 2b to 0 as input in turbo tax income? or there is somewhere else I can do input to correct it?

[shengwangster]

Add one more detail information, my 1099-R box 7 code is 2, I think my situation is supposed to be code N--Recharacterized IRA contribution made for 2024 and recharacterized in 2024. Is this the reason this $7000 becomes taxable income from my traditional IRA distribution in turbo tax? How can I fix it?

[DanaB27]

If you have code 2 in box 7 then this would indicate you made a conversion and did not request a recharacterization. Please see What's the difference between a conversion and a recharacterization? for details.

To clarify, you entered a traditional IRA contribution in the IRA contribution section under Deductions & Credits. And you entered your 1099-R in the retirement section and indicated it was a conversion in the follow-up questions.

To enter the nondeductible contribution to the traditional IRA for 2024:

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 contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2023 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 "Here's 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 2023 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

For TurboTax Desktop see How do I enter a backdoor Roth IRA conversion?

If you still cannot this to work then it would be helpful to have a TurboTax ".tax2024" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. Reply to this thread with your Token number and add @DanaB27 . This will allow us to open a copy of your return without seeing any personal information.  

The instructions for TurboTax Download: 

1. On your menu bar at the very top, click "Online"
2. Select "Send Tax File to Agent"  
3. Click "Send"
4. The pop-up will have a token number
5. Reply to this thread with your Token number and add @DanaB27 . This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

[shengwangster]

@DanaB27  Token number 1291254

I tried your suggested input but the problem has not resolved, I followed your instruction of the “diagnostic” file, the above is the token number, can you help?

Thank you!

[DanaB27 · Accepted solution]

Thank you. I reviewed your return. You entered a recharacterization in the IRA contribution interview you need to delete the entry on the "Tell Us How Much You Transferred" screen.

Please note since you entered a value on December 31. 2024, part of your conversion is taxable according to the pro-rata rule. 

FYI, TurboTax is using Taxable IRA Distribution Worksheet instead of Form 8606 per Pub 590-B  to calculate the nontaxable portion as indicated by the * next to line 13.

[shengwangster]

@DanaB27 thank you, it works. I though I need fill in this recharacterization amount then withdrawal, but it makes turbo tax to identify this 7000 more in taxable income. Since the net effect is zero, after I delete both recharacterization amount and withdrawal entries, seems the numbers of my taxable income is correct now.

The amount of traditional IRA at the end of 2024 is just one dollar, it is the interests in one day between transfer in and out of the 7000, I understand I need pay tax for this one dollar. Thank you!