I did backdoor Roth IRA in 2024 for 7000 from Trad IRA. Why is the 1040 showing 500 as taxable ? Is it because 2023 8606 is 6500?

[MayaD]

A Roth conversion is not limited based on the year you contributed to your traditional IRA, but rather on the year you actually perform the conversion. The conversion results in taxation of any untaxed amounts in the traditional IRA. 

If you deducted your traditional IRA contributions and then decided to convert your traditional IRA to a Roth IRA, you will need to pay taxes on the pre-tax assets. Additionally, if you convert any investment earnings from your traditional IRA to your Roth IRA, you will have to pay taxes on the earnings.

irs.gov

[hirenkava]

Let me clarify - those 7000 are already post tax. I am doing backdoor because my income is higher than the cutoff to be eligible for trad ira deduction. I was hoping that turbotax will ask me if this amount is post tax it but it did not. And now its showing 500 as taxable which is wrong imo. Is there something i can do to correct it ?

[ThomasM125]

You needed to first enter a non-deductible IRA contribution to a traditional IRA in TurboTax, and then enter the Form 1099-R reporting the rollover into TurboTax and indicate that it is a Roth IRA conversion. You will be asked to enter balances in IRA accounts for current and previous years and also the non-deductible contributions you made to your traditional IRA accounts. You have to be careful to answer those questions accurately to get everything to report properly.

For the backdoor IRA, enter a traditional IRA contribution in the Deductions and Credits section of TurboTax, then Retirements and Investments, then Traditional and Roth IRA Contributions. Indicate that your traditional IRA contribution is non-deductible when asked in the program:

When you enter the 1099-R form in TurboTax, 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.

[dbhaumik]

Hello, I have the same issue, tried filling out in different ways as recommended, nothing is helping, it still shows that I have to pay taxes for $500/-.

'Do you want to make IRA contributions non deductible', that option doesn't even show up.

Further help would be appreciated. Thanks

[DanaB27]

Please note if you have a retirement plan at work and are over the income limit it will be nondeductible automatically. You do not get the “Choose Not to Deduct IRA Contributions”  screen but instead get a warning that your income is to high to deduct the contribution. After this you get a screen saying $0 is deductible. This is what you want for the backdoor Roth.

To clarify, did you have any pre-tax funds in the IRA? If yes, then the the pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part. You can see the remaining basis on line 14 of Form 8606, this basis can be carried forward. 

Also, if you had earnings before you converted the funds then these will be taxable as well.

If you had a basis on your 2023 Form 8606 line 14 but do not see the “Any Nondeductible Contributions to Your IRA?”  screen then please see Why am I unable to report my 2023 for 8606 basis?

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 "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 2023 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[dbhaumik]

Tried all that was mentioned, still doesn't work.  This year's max backdoor Roth IRA contribution is 8000, last year it was 7500. When asked to write the total basis from 2023 tax returns I have to mention 7500.

Turbo tax then charges taxes for the extra 500. Instead of saying 7500 if I say 8000 ( which is wrong) it doesn't charge tax for the extra 500.

In form  8606 enter your non deductible contributions to traditional IRAs for 2024 it shows the value of 7500 and not 8000, it should be 8000.

[DanaB27]

To confirm you made a 8,000 contribution for 2024 and a $7,500 contribution for 2023, correct? Then your Form 8606 should have $8,000 on line 1 (from entering the $8,000 nondeductible traditional IRA contribution in the IRA contribution section) and  $7,500 on line 2 (when you enter the basis from 2023 Form 8606 after you get the “Any Nondeductible Contributions to Your IRA?” screen).

To clarify, you made the $8,000 contribution for 2024 in 2024?  And you have a 2024 Form 1099-R for the conversion with $15,500?

@dbhaumik 

[Bill199]

I am having the same issue. I did a traditional IRA to Roth IRA conversation last year. I am following all the steps as described below. I am still having trouble. Turbo Tax is showing 6500 as non taxable and 500 as taxable.

[KeshaH]

I'd like to look at your return and see exactly what you see to help come to a resolution. The return will be scrubbed and won't include any of your personal details.

If you're using TurboTax Online:

Once you're logged in to your account,

- on the left hand panel, click on Tax Tools and then choose Tools

- on the pop up window, select Share my file with Agent

- you'll see a message saying you'll give us a copy of your tax return. Your personal information will be changed so we can't see any private information.

- click okay and you'll get another message with a token

If you're using TurboTax Desktop:

• Click on Online in the top menu of TurboTax Desktop for Windows
• Select 'Send Tax File to Agent'
• Write down or send an image of your token number and state then place in this issue.
• We can then review your exact scenario for a solution

Please reply to this message with your token so that we can further assist you. Let us know all other states that are included on the return.

@Bill199 

[DCB511]

Hi KeshaH - I am having a similar issue. My spouse and I each did our first backdoor conversion ($7500 each) in 2024 for the 2023 tax year. We then did $8000 each throughout the remainder of 2024. Our 1099-Rs  each show $15,500. Even though $7500 was for 2023 and $8000 was for 2024. I can't seem to figure out how to have TurboTax online account for the $15000 ($7500 each) conversion for 2023 from the 2024 1099-R. It shows the 2023 conversion amounts as retirement income. Is there a way to address this?

[KeshaH]

Make sure when you enter your contributions for 2024 you also indicate that you have basis in your IRA from 2023. Even though the contributions weren't actually made until 2024, they're still treated as being made by 12/31/2023. See screenshots below.

@DCB511 

[DCB511]

Thank you @KeshaH! That makes sense now. It fixed the tax it was saying I owed. I appreciate the help!

[hirenkava]

This is turning out to a mess and lot of work. I have filed for extension and generated the token to share file with agent. How do I share the token number and resolve this issue of unnecessary tax deduction from 2024 filing?

[DanaB27]

You can post the token here.  Don't worry if the spam filter hides it. Usually we are able to still see it.

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.

@hirenkava