2018 Traditional IRA Converted to Roth in 2019

[lxsw]

I made a contribution to my Traditional IRA in 2018, and rolled over to my Roth IRA in 2019 along with my 2019 Traditional IRA, which led to a gross distribution amount of 11k on my 2019 1099-R form. When I entered the 11k into Turbo Tax, my federal tax went up by $1300.

I heard that you can go back 5 years with the back door conversion. How can I enter the info into Turbo Tax to reflect part of the gross distribution from 2019 was actually contributed in 2018? to avoid paying 1300 tax.

Thanks!

[SusanY1]

In order to make a rollover into a Roth that is free from tax, it must be done from a nondeductible IRA, it cannot be done from any Traditional IRA.  The so-call "backdoor Roth IRA" is a nondeductible IRA contribution rolled over into a Traditional IRA   in the same tax year. There is no 5 year rule for this - there is only a 5 year holding period for the funds once they are moved into the Roth before you can take them out of the Roth.

You cannot rollover 2018 funds into a Roth or deductible Traditional IRA funds into a Roth without paying tax on the transaction.

What you describe sounds like a taxable transaction this year.  

[lxsw]

Hi, thanks for replying. 

The money I contributed to traditional IRA in 2018 weren't qualified for deduction; so I already paid tax on that money. Can I fill out the F8606 for 2018 during this tax filling. 

[DanaB27]

No, you cannot fill Form 8606 for 2018 on your 2019 tax return. The 2018 nondeductible contributions to the traditional IRA should have triggered Form 8606 on your 2018 tax return. You will find the basis on line 14 on Form 8606.

To enter a backdoor Roth you will enter the 2019 nondeductible contribution to the traditional IRA in TurboTax. Please follow the steps below to enter the nondeductible contribution.

1. Login to your TurboTax Account 
2. Click "Federal" from the left side of your screen
3. Click “Deductions &Credits” on the top
4. Scroll down to “Retirement and Investments” and click “Show more”
5. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
6. Select “traditional IRA”
7. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
8. Enter the amount you contributed
9. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
10. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes”
11. If you had a basis in the Traditional IRA before then enter the amount.
12. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

Then you will enter the 1099-R and make sure you enter the basis correctly:

1. Login to your TurboTax Account 
2. Click "Federal" from the left side of your screen
3. Scroll down to “Retirement Plans and Social Security” and click “Show more”
4. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan Withdrawals (1099-R)" 
5. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
6. Click "I'll Type it Myself"
7. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
8. Click "Continue" and enter the information from your 1099-R
9. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
10. Then choose “I converted all of this money to a Roth IRA account.”
11. On the "Your 1099-R Entries" screen click "continue"
12. Answer "yes" to "Any nondeductible Contributions to your IRA?"
13. Answer the questions about the basis

[lxsw]

Thanks for replying!

That would mean I end up paying tax twice on the contribution that I made to my traditional IRA in 2018. Is that really my only option?

[macuser_22 · Accepted solution]

You don't pay twice.   You enter the 2019 contribution  into the IRA contribution section and mark it non-deductible.  And in the 1099-R interview

You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

The 2019 contribution should be on the 8606 line 1, the 2018 contribution on line 2 and the total of both on line 3.

If you did not file a 2018 8606 then you must mail in a stand-alone 2018 8606 now.

https://www.irs.gov/pub/irs-prior/f8606--2018.pdf

https://www.irs.gov/pub/irs-prior/i8606--2018.pdf

[lxsw]

@macuser_22 thanks for providing the info!

Do I need to send any other doc along with the completed 2018 Form 8606 to the IRS? Is the address below the correct place I should send this form to? I'm in Virginia.

Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999-0002

Thank you for your help!

[macuser_22]

Nothing else needs to be sent.

That is the correct address.  See:

https://www.irs.gov/filing/where-to-file-addresses-for-taxpayers-and-tax-professionals-filing-form-1...