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Level 2
posted Feb 25, 2023 10:28:52 AM

I have both deductible and nondeductible retirement accounts. Do I need to add nondeductible cost basis if I converted from a pretax account?

I have both deductible and nondeductible retirement accounts.  I did a Roth conversion from my pretax account.  TurboTax asks my cost basis for my nondeductible account even though the entire conversion was from my pretax account.  It then calculated that part of my conversion is not taxable.  Is that correct?  Why would my nondeductible IRA affect how much of the conversion from my pretax account is taxable?  

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1 Replies
Expert Alumni
Feb 25, 2023 10:49:12 AM

To confirm you converted funds from your traditional IRA to Roth IRA?

 

If yes, and you had nondeductible traditional IRA contributions in prior years, reported on Form 8606, then you will enter your basis from line 14 of your last filed Form 8606 during the interview.

 

If you have more than one traditional/SEP/SIMPLE IRA then they are considered one account for the purpose to calculate the taxable part according to the pro-rata rule. You cannot just only move the taxable part. For each distribution/conversion, the pro-rata rule is applied and therefore each distribution/conversion will have a taxable and non-taxable part as long as you have pre- and after-tax funds in the accounts.

 

To enter your 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 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs