IRA Distribution Taxable Income Higher Than Expected

[TaxInquiries34578]

There are four accounts:

Employer Traditional IRA (Rollover from 401k)

Employer Roth IRA (Rollover from 401k)

Personal Traditional IRA

Personal Roth IRA

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So here is what I did:

Tax Year 2023:

Contributed $6500 to my Personal Roth and realized it needed to be a backdoor contribution. So I recharacterized it as a traditional contribution in 2024, to my Personal Traditional IRA, and then converted it to my Personal Roth ($7005.53 was converted amount of contribution plus earnings).

Tax Year 2024:

Contributed $7000 to my Personal Roth ($3054.03 direct to the Personal Roth and $3948.82 via backdoor through my Personal Traditional IRA) and realized it was ALL excess contributions as I had no earned income for the year. I had all $7000 in contributions and earnings returned by my brokerage company to my non-retirement account in early 2025.

I also converted $31,159.85 from my Employer's Traditional IRA (from my 401k originally) to my Employer Roth IRA for 2024. This amount should be taxable as income.

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I have three 1099-R's for listed for tax year 2024:

Employer Traditional IRA: $31,159.85 all taxable (box 7 is 2)

Personal Traditional IRA: $10,954.41 all taxable (box 7 is 2)

Personal Roth IRA: $7,005.53 none taxable (box 7 is R)

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So what I'm expecting is $31,159.85 in taxable distributions. However, TurboTax is telling me I have $42,114 in Traditional and Roth distributions (which is $31,159.85 + $10,954.41) of which it says $36,022 is taxable. I have no idea how it calculated $36,022 and it should be $31,159.85 right? How do I tell TurboTax that the $10,954.41 in Personal Traditional IRA distributions are non-taxable backdoor conversions? I already inputted that I returned the excess contributions for 2024 into TurboTax ($3054.03 direct to the Personal Roth and $3948.82 via backdoor through my Personal Traditional IRA).

[DanaB27]

This is tricky to enter into TurboTax since you converted the excess contribution to the Roth IRA. 

To clarify, was you Traditional IRA $0 at the end of 2024? If yes, then you could enter the nondeductible Traditional IRA contribution in the IRA contribution interview to get the basis on Form 8606 line 1 for the backdoor Roth.  When you get to the penalty screen at the end of the IRA contribution interview only enter the Roth IRA excess contribution amount as withdrawn.

If your balance is $0 then you won't get the 6% penalty calculated since this is calculated as the smaller of excess contribution or the value of your Roth IRAs on December 31, 2024 (including 2024 contributions made in 2025).

Please see How do I enter a backdoor Roth IRA conversion?