2024 Backdoor Roth Conversion impacting fed+state refunds

[DanaB27]

To clarify, did you make the $7,000 traditional IRA contribution in 2024 for 2024 and you entered this in the IRA contribution interview? And you converted the $7,000 in 2024 and have Form 1099-R entered to show the conversion? 

Did you have pre-tax funds in the traditional IRA? Was the value of all traditional/SEP/SIMPLE IRA $0 on December 31, 2024? You find the value at your end of the year statement. 

If you followed all the steps and cannot figure out what is wrong it would be helpful to have a TurboTax ".tax2024" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. Reply to this thread with your Token number and add @DanaB27 . This will allow us to open a copy of your return without seeing any personal information.  

The instructions for TurboTax Download: 

1. On your menu bar at the very top, click "Online"
2. Select "Send Tax File to Agent"  
3. Click "Send"
4. The pop-up will have a token number
5. Reply to this thread with your Token number and add @DanaB27 . This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@kiddkevin01 

[kiddkevin01]

To clarify, did you make the $7,000 traditional IRA contribution in 2024 for 2024 and you entered this in the IRA contribution interview? And you converted the $7,000 in 2024 and have Form 1099-R entered to show the conversion? 

> Yes and yes!

Did you have pre-tax funds in the traditional IRA? Was the value of all traditional/SEP/SIMPLE IRA $0 on December 31, 2024? You find the value at your end of the year statement. 

> It's $0

The token number is: 1284881, @DanaB27.  Please provide me with a resolution. Thanks!

[DanaB27]

Thank you. I reviewed your return.

You entered a value for all your traditional/SEP/SIMPLE IRAs on December 31, 2024, that isn't $0. It seems you had pre-tax funds in your traditional/SEP/SIMPLE IRAs and therefore the the pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part. You can see the remaining basis on line 14 of Form 8606, this basis can be carried forward. 

The Backdoor Roth only works if your traditional/SEP/SIMPLE IRAs are empty.  If you plan to use this strategy in the future you might want to think about a reverse rollover where you rollover IRA money to a company plan, like a 401(k). Only pre-tax funds can be rolled from an IRA to a company plan. Therefore, you would isolate the basis and could start the Backdoor Roth procedure fresh. But it only works if your employer allows it, not all plans do.

If the value of all your traditional/SEP/SIMPLE IRAs on December 31, 2024, is indeed $0 then please go back to the retirement section to edit your entry:

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. On the "Review your 1099-R info" screen click "Continue"
4. Continue till you get to the "Tell us the value of Your Traditional IRA" screen and edit the entered value.

@kiddkevin01 

[kiddkevin01]

@DanaB27 Thanks for taking a look! I entered the value of all your traditional/SEP/SIMPLE IRAs on December 31, 2024, is $0. In addition, the total basis as of Dec 31, 2023 I entered is $0 as well in the Deductions & Credits tab but it doesn't seem to propagate those informations I entered to 1040 nor 8606. I just did it again and my token number is 1285472. Can you check how I can get that fixed please? Thanks!

[DanaB27]

Thank you, I looked at the token and it still has a value other than $0 entered on the "Tell us the value of Your Traditional IRA" screen in the retirement section, therefore, TurboTax is still using the pro-rata rule and only part of the conversion is nontaxable. 

I see you entered the value $0 in the IRA contribution section but this screen is different from the one in the retirement section. Please review your entry in the retirement section:

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. On the "Review your 1099-R info" screen click "Continue"
4. Continue till you get to the "Tell us the value of Your Traditional IRA" screen and edit the entered value.

@kiddkevin01

[kiddkevin01]

That works! Thank you so much, @DanaB27!

Can you help me with one last thing since I have you here:

How do I uncheck Form 2210 Part II, Box D as shown in the screenshot?

I went to the "Underpayment Penalties" section and clicked on "No" to "Actual Withholding" but the Form 2210 Part II, Box D is still not unchecked. Can you help please?

My token number is 1286129

[DanaB27]

You need to remove your entries on the "Tax Withholding by Quarter" screen then you can go back to the "Actual Withholding"  screen and answer "No". This should remove the checkmark it Box D.

FYI, I removed the screenshot from your post since it had personal information listed. Please do not post any sensitive information in this public forum.

@kiddkevin01 

[kiddkevin01]

It's resolved now! Thank you so much, @DanaB27 

[kiddkevin01]

@DanaB27I have one last question as I’m at the payment selection screen (screenshot attached). I truly appreciate all your help!

I need to split my payments in two because I owe a large amount to the IRS and need time to gather the funds. However, the underpayment penalty is much smaller, and I don’t want it to keep accruing interest. I’d like to pay the penalty now and the remaining balance a month later, just before 4/15/2025.

Which option in TurboTax Online should I select in the attached screenshot to make these two payments separately at different times?

[DanaB27]

You can pay directly at the IRS website and then make two payments. In TurboTax you would select "Pay by check" and the go the IRS Make a payment site to make the payments.

@kiddkevin01 

[kiddkevin01]

Thanks @DanaB27!

For the first payment for the underpayment penalty, can you check the attachment to see if these are the correct reason and options to select on directpay.irs.gov website?

Just to confirm that I could do the following step-by-step?

1. Select "Pay by check" and e-file the personal tax return via Turbotax

2. Use directpay.irs.gov website to pay the first payment for the underpayment penalty with the reason and options selected in the attachment

3. Pay the second payment for the tax due before the deadline at 4/15/2023

I really appreciate your help, @DanaB27!

[DanaB27]

Yes, these steps are correct and the selections on the screen are correct.

@kiddkevin01 

[TaxPayer2015]

@DanaB27 

Hi Dana,  I have a similar problem that I can't figure out why.  Here is my tocken number:  

[removed]-27949397

Please help as all my $8000 contribution is marked as taxable.

-Jess

[baldietax]

@TaxPayer2015 have you followed thru all the steps for the Trad IRA contribution and 1099-R detailed here

https://ttlc.intuit.com/turbotax-support/en-us/help-article/retirement-benefits/enter-backdoor-roth-...

[TaxPayer2015]

I think I checked some options wrong.  When I followed the steps the amount comes out correctly now, but I already filed the return. How can I correct the mistake in my filed return?