I owe money by pro rata rule, since received employer rollover after already doing tIRA to Roth conversion (backdoor). i can't figure out if this is being accounted for.

[iwao-tanaka]

contributed 5500 to t-IRA, then converted to Roth.
Later in the year I unexpectedly received rollover of 2680.00 from prior employer and rolled over to t-IRA.  I wasn't aware of the pro rata rule and didn't do anything so it was still in the t-IRA on Dec 31 2016.  My understanding is I now owe tax on a portion of the 5500 that was converted to Roth.  I can't figure out if this is being accounted for and if not how to add this.  I have two 1099-R's, one for the conversion and one for the rollover.

[macuser_22]

Did you already file?

It would only be there is you entered it when the interview asks for prior year non-deductible contributions and then to enter the 2016 year end total value of all Traditional IRA accounts.

You should have a 8606 form that calculates the taxable amount on lines 6-15 (or lines 1-13 on a Taxable IRA distribution worksheet if there is an * (asterisk) on line 15 of the 8606).    The total 2016 year end value would be on the 8606 line 6 or line 4 of the worksheet if you entered it.

[iwao-tanaka]

i haven't filed yet.  i read about the pro rata rule in January.  when i used the search tool for 8606 it brought me to the the IRA questions, so do i add the employer pension amount to my personal contribution thus $8180?  i thought it was a rollover so had only put $5500 as how much i contributed.

[macuser_22 · Accepted solution]

In the interview you should see these 3 screens.  The "Lets find your basis" should be left blank.

[dmertz]

I suspect that the basis came from an entry using the EasyGuide button.  The only way to get rid of that entry is to again use the EasyGuide button to go in and explicitly zero the earlier entry.

[macuser_22]

BTW - @dmertz I discovered that even though there is an asterisk on line 15 on the 8606 in the PDF the  Taxable IRA distribution worksheet is not included in the PDF so there is no way to see the actual calculations since the 8606 lines 6-12 are blank - even if I save pdf or print all worksheets.

[iwao-tanaka]

thanks guys (or gals).  really appreciate it.

[macuser_22]

Here is my method for a backdoor Roth.  I made bold the spot where the year end total goes.

This so-called “back-door Roth” method ONLY works if you have NO OTHER Traditional IRA accounts.  If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself.  Only if you started with NO Traditional IRA and ended up with a zero amount in ALL Traditional IRA accounts will this Roth conversion not be taxable.

First you must enter your Traditional IRA contributions (if there were 2016 contributions).

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

Be SURE to answer the follow up that the are choosing to make this contribution NON-DEDUCTIBLE - if that screen comes up. (DO NOT say that you moved (recharacterized) the money to a Roth) – this is a conversion, not a recharactorazition.

Then enter the 1099-R that shows the distribution.

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),,
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

Answer the follow-up questions answer the question that you moved the money to another retirement. The screen will open up with choices of where it was moved. Choose you converted it to Roth IRA.

When asked if you have made any non-deductible contributions say " "yes" if you did then enter the non-deductible contributions made for tax years before 2016.     (Usually zero unless you also made a 2015 or earlier non-deductible contribution).

Enter the 2016 year end value of your Traditional IRA a "0" (zero) - if it is in fact zero - this tax free Roth conversion will not work if it is not zero.

[If you had any other Traditional IRA at the end of 2016, then the nondeductible "basis" must be pro-rated over the current distribution and the total IRA value and only a portion of the Roth conversion will be non taxable and part will be taxable, with the remaining non-deductible basis carrying forward for future distributions. You can never only withdrew the nondeductible basis as long as the IRA exists and has a value more than zero.]

The non-deductible amount of your contribution will be subtracted from the taxable amount of the conversion on then 8606 form and enter on line 15a of them 1040 form and a zero taxable amount on line 15b  if you did it right.

Also see this website that has some screenshots of the procedure
http://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html

[iwao-tanaka]

thank you.  if i understand correctly, i would pay then the pro-rated tax if i do backdoor roth next year, on the 2017 return?

[macuser_22]

You report the 1099-R for a conversion in the tax year that the conversion took place.    If that was 2016 as you stated in the question, and you have the 1099-R for the conversation then is gets reported now on your 2016 tax return.   If there is another conversion that took place in 2017, then it gets reported next year on your 2017 tax return.

[dmertz]

You should also have entered the rollover of the $2,680 from the employer plan.  If this money is still in a traditional IRA, it will be part of your December 31, 2016 balance that you must enter after clicking the Continue button on the Your 1099-R Entries page and will be accounted for on line 6 of Form 8606 to in calculating the taxable amount of your $5,500 Roth conversion.

[iwao-tanaka]

ok i do have two 1099-R's (conversion and rollover).  my issue is turbotax isn't saying i need to pay tax on my conversion in 2016 due to having positive balance on Dec 31.  i paid to see the .pdf, line 15b on 1040 and lines 6 and 15 on 8606 are both 0.

[iwao-tanaka]

thanks for all the help.  yes i did enter both 1099R's, and also entered the 2680 into the Dec 31 balance in Turbotax but its still not showing up on the ,pdf 8606 line 6.

[dmertz]

If Form 8606 line 6 is zero, you did not enter your December 31, 2016 balance where needed.  Click the Continue button on the Your 1099-R Entries page and proceed to the Tell Us the Value of Your Traditional IRA page where you must enter the value in the first box on that page.  If you are married filing jointly, make sure all of your entries are associated with the correct spouse.

[iwao-tanaka]

i double checked that the Dec 31 balance of $2680 is entered as instructed (clicking through the 1099-R entries page), but its still not showing up on the 8606 line 6.  i called the help line and went over everything with a phone rep from turbotax who is telling me i dont need to pay taxes because the the 1099'R's have codes 02 (Roth conversion) and G (rollover), which i thought was true only if i left everything in the t-IRA.  maybe i should just "clear and start over"?