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Level 2
posted Apr 17, 2022 9:21:22 PM

Over MAGI. Turbotax is not allowing me to claim backdoor Roth conversion without penalty

Due to the fact I make more than the MAGI (married, filing jointly), I am trying to claim backdoor Roth (i.e, conversion from Traditional IRA to Roth IRA). I did in fact contribute $6,000 to Traditional IRA in January 2021 and subsequently converted it to a Roth IRA.  Here are the steps I'm taking to do the IRA conversion in Turbotax:

  1. Sign in to your TurboTax account
  2. Open (continue) your return
  3. Deductions & Credits > Click Edit next to 'Traditional and Roth IRA Contributions'
  4. Select the Jump to link in the search results
  5. Select Roth IRA and Continue
  6. Answer NO on the screen, Is This a Repayment of a Retirement Distribution? 
  7. For total 2021 Traditional IRA I'm entering  $6,000 as on the screen, Tell Us How Much You Contributed?
  8. I'm entering $6,000 on the screen, Tell Us How Much You Transferred (from traditional to Roth)
  9. If you would like guidance for this section, select Fill in Template. *Particulars were entered.*

At the end of all these steps, I'm still assessed a $360 penalty for contributing to the Roth IRA when in fact I am trying to do the backdoor Roth conversion. Makes no sense because according to Turbotax help and Investopedia, the following guidelines/limits don’t apply to backdoor Roth IRA conversions:  Roth IRA Income Limits: For 2021, if your MAGI is $140,000 or higher and you’re single, or $208,000 or higher and you’re married filing jointly or a qualifying widow or widower, then you can’t contribute to a traditional Roth IRA.11 

0 1 435
1 Best answer
Expert Alumni
Apr 18, 2022 5:03:02 PM

Please follow the steps below to enter your backdoor Roth.

 

To enter the nondeductible contribution to the traditional IRA:

  1. Open your return
  2. Click “Deductions &Credits” on the top
  3. Click "I'll choose what to work on"
  4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
  5. Select “traditional IRA”
  6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
  7. Enter the amount you contributed
  8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
  9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
  10. Enter your basis in the Traditional IRA from your 2020 Form 8606 line 14 (if you had a basis in the prior year)
  11. 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 1099-R conversion: 

 

  1. Click "Federal Taxes" on the top and select "Wages & Income"
  2. Click "I'll choose what to work on"
  3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
  4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
  5. Click "I'll Type it Myself"
  6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
  7. Click "Continue" and enter the information from your 1099-R
  8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
  9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
  10. On the "Your 1099-R Entries" screen click "continue"
  11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
  12. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

1 Replies
Expert Alumni
Apr 18, 2022 5:03:02 PM

Please follow the steps below to enter your backdoor Roth.

 

To enter the nondeductible contribution to the traditional IRA:

  1. Open your return
  2. Click “Deductions &Credits” on the top
  3. Click "I'll choose what to work on"
  4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
  5. Select “traditional IRA”
  6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
  7. Enter the amount you contributed
  8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
  9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
  10. Enter your basis in the Traditional IRA from your 2020 Form 8606 line 14 (if you had a basis in the prior year)
  11. 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 1099-R conversion: 

 

  1. Click "Federal Taxes" on the top and select "Wages & Income"
  2. Click "I'll choose what to work on"
  3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
  4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
  5. Click "I'll Type it Myself"
  6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
  7. Click "Continue" and enter the information from your 1099-R
  8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
  9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
  10. On the "Your 1099-R Entries" screen click "continue"
  11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
  12. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs