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Level 1

I made non-deductible contributions to a traditional IRA and converted to Roth, but I am being taxed on the conversion amount. Where or how do I complete form 8606?

 
6 Replies
Level 1

I made non-deductible contributions to a traditional IRA and converted to Roth, but I am being taxed on the conversion amount. Where or how do I complete form 8606?

This is sometimes referred to as a Backdoor Roth.

Backdoor ROTH conversion consists of two parts

1.       The nondeductible contribution
2.       The non-taxable distribution

To record the nondeductible contribution in TurboTax Premier do the following:

  • Federal Taxes >> Deductions & Credits >>Scroll Down to >> Traditional and Roth IRA Contributions
  • Select >> Start/Update
  • Traditional IRA and Roth IRA >> Select >> Traditional
  • Did (Name) Contribute To a Traditional IRA  >> Select >> Yes
  • Was This a Repayment of a Retirement Distribution? >> Select >> No
  • Tell Us How Much You Contributed >> Fill In as appropriate >> Select >> Continue
  • Did You Change Your Mine? >> Select >> No
  • Retirement Plan at Work >> Select >> Yes/No
  • Any Excess IRA Contributions Before 2016 >> Select >> Yes/No
  • Any Nondeductible Contributions to (Name) IRA? >> Select >> Yes >> Select >> Continue
  • Let’s Find Your IRA Basis >> Fill In as appropriate >> Select >> Continue
  • Income Too High To Deduct an IRA Contribution >> Select >> Continue
  • Choose Not to Deduct IRA Contributions >> Select >> Yes >> Select >> Continue
  • Your IRA Deduction Summary >> Your IRA Deduction >> $0 >> Select >> Continue

Now we’ll report the Non-taxable distribution into the Roth

  • Federal Taxes >> Wages & Income >> Select >> I’ll choose what I work on
  • Scroll Down to >> Retirement Plans and Social Security >> IRA, 401(k), Pension Plan Withdrawals (1099-R) >> Select >> Start/Update
  • Your 1099-R >> Select >> Yes >> Select >> Continue
  •  Let Us Enter Your 1099-R >> Select >> I’ll type it myself >> Select >> Continue
  • Tell Us Which 1099-R You Have >> Select >> 1099-R >> Select >> Continue
  • Fill In as appropriate >> Select >> Continue
  • Let Us Know a Little More About This Distribution >> Select >> From a traditional IRA
  • Is this IRA subject to an early withdrawal penalty >> Select >> No >> Select >> Continue
  • Did (Name) Inherit This (Name) IRA? >> Select >> No >> Select >> Continue
  • What Did You Do With The Money From Fidelity? >> Select >> (Name) moved the money to another retirement account >>
  • Select >> (Name) converted all of this money to a Roth IRA >> Select >> Continue
  • Move Funds? >> Select >> No (Name) left the money in the Roth IRA >> Select >>Continue

If all this is done correctly and you had NO deductible IRA contributions, on your form 1040, line 15b should be $0 and line 32 should be $0

Level 8

I made non-deductible contributions to a traditional IRA and converted to Roth, but I am being taxed on the conversion amount. Where or how do I complete form 8606?

I see this answer is from 2 years ago.  Both last year and this year I followed the steps as shown and TT nonetheless treats the IRA dist'n as taxable.  A fix is needed.  I had to go to the forms in order to get the dist'n treated properly.
Level 1

I made non-deductible contributions to a traditional IRA and converted to Roth, but I am being taxed on the conversion amount. Where or how do I complete form 8606?

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Level 8

I made non-deductible contributions to a traditional IRA and converted to Roth, but I am being taxed on the conversion amount. Where or how do I complete form 8606?

If you made a Roth conversion in 2019, The 1099R from your t-IRA will issue next year and it will be reported as a taxable distribution for tax year 2019.  If the t-IRA contribution was made in tax year 2018 (even if made this year) you need to indicate on your 2018 return if it was deductible or after tax.  If the latter, you need to put it in on 8606 so when you report the 2019 Roth conversion, the 1099R distribution from your t-IRA will be considered non-taxable.  My general recommendation is to make the non-deductible t-IRA contribution and the subsequent Roth conversion both in the same year and, preferably, early in the year.  It makes the tax handling more straightforward so that all the paperwork lines up.
Level 1

I made non-deductible contributions to a traditional IRA and converted to Roth, but I am being taxed on the conversion amount. Where or how do I complete form 8606?

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Level 20

I made non-deductible contributions to a traditional IRA and converted to Roth, but I am being taxed on the conversion amount. Where or how do I complete form 8606?

@nitin.sood007 -  If you converted in 2019, then you will receive a 2019 1099-R next January in 2020 and report it on your 2019 tax return.   The only thing that would go on a 2018 tax return  would be the non-deductible 2018 contribution reported on 2018 8606 form that you will use next year to report the carry over basis.

The 2019 contribution  will also be reported next year on yiur 2019 tax return.