Back Door Roth Conversion

[mmn7052]

Hello,

I have been doing back door roth contributions for years.  This is the first year in awhile that I am attempting to do my own taxes.  Every time I enter the information into Turbo Tax it is showing I have a penalty.  This has never happened when I had my taxes professionally prepared.  What am I doing wrong?

[RachelW33]

It sounds like you are entering your Roth IRA contribution in the Deduction & Credits section.  

First, you will need to delete this entry by following these steps in TurboTax Online:

1. Sign in to your TurboTax account
2. Open your return if it’s not already open
3. Select Federal from the menu, then Deductions & Credits
4. Locate the Retirement and Investments section and select Start next to Traditional and Roth IRA Contributions
5. Uncheck the IRA box and select Continue
6. Answer Yes to the question Remove Roth IRA Contributions?

A Back Door Roth requires two steps in TurboTax.  

The first step is to report your 2023 non-deductible Traditional IRA contribution on Form 8606. Please follow these steps from this TurboTax Help Article:

1. Sign in to your TurboTax account
2. Open your return if it’s not already open
3. Select Federal from the menu, then Deductions & Credits
4. Locate the Retirement and Investments section and select Start next to Traditional and Roth IRA Contributions
5. Check the Traditional IRA box and select Continue
6. Answer Yes to the question Did you contribute to a Traditional IRA?
7. Answer No to the question, Is This a Repayment of a Retirement Distribution?
8. On the screen, Tell Us How Much You Contributed, enter the amount contributed and select Continue
9. Answer No on the screen Did You Change Your Mind?, then answer the questions on the following screens.
10. When you reach the Choose Not to Deduct IRA Contributions screen, select Yes, make part of my IRA contribution nondeductible, enter the amount you contributed, then select Continue. If none of your contribution can be deducted, you won't see the option to make part of it nondeductible. Instead, the full amount of your contribution will automatically be nondeductible.
11. Select Continue on the Your IRA Deduction Summary screen

The second step is to report the conversion from the Traditional IRA to the Roth IRA.  Assuming the conversion was in 2023, you should report your Form 1099-R as follows: 

1. Select Wages & Income
2. Locate the Retirement Plans and Social Security section and select Show more, then select Start or Revisit next to IRA, 401(k), Pension Plan Withdrawals (1099-R)
3. Answer Yes to Did you get a 1099-R in 2023?, then Continue.
   • If you land on the screen, Your 1099-R Entries, select Add Another 1099-R
4. Select how you want to enter your 1099-R (import or type it in yourself) and follow the instructions.
5. Answer the questions on the following screens, until you reach Tell us if you moved the money through a rollover or conversion.
6. Select I converted some or all of it to a Roth IRA and Continue
7. Next, choose Yes, all of this money was converted to a Roth IRA and click Continue
8. Continue answering questions until you come to the screen, Review your 1099-R info

[allentax1]

Hi,

I'm having the same issue as the original poster, and the proposed solution is not working for me.  :

1. I double checked that only Traditional IRA is checked and Roth IRA is not checked.
2. After I am asked Did You Change Your Mind? for recharacterization, I select "No".
3. Then I am asked Any Excess IRA Contributions Before 2023?  I also select "No"
4. Then I am asked Any Nondeductible Contributions to xxx's IRA?  I select "Yes, xxx made and tracked nondeductible contributions to xxx's IRA."
5. Then I am asked Let's Find Your IRA Basis, and I enter 0
6. Then it says Income Too High To Deduct an IRA Contribution
7. Then it shows Your IRA Deduction Summary with 0

I am never shown the option to enter how much of my contribution is non-deductible.  I have tried deleting the IRA worksheets and 1099-R's several times, but I'm always seeing the same issue.  Like the original poster, I have entered backdoor Roth successfully on TurboTax for many previous years, but this year it's not working.  Every time I import my 1099-R, I see the full amount of the conversion being taxed.  Please help!

[RachelW33]

As stated in Step 10 above, if none of your contribution can be deducted, you won't see the option to make part of it nondeductible. Instead, the full amount of your contribution will automatically be nondeductible and reported on Form 8606.

As for the full amount of your conversion being taxed, first, make sure that the IRA/SEP/SIMPLE box is checked on the 1099-R entry screen.  Next, walk through 1099-R interview questions to indicate that all of the Non-Deductible Traditional IRA contribution was converted to a Roth IRA (Step 2 above).

If these suggestions don't resolve this issue, please let me know so that I can assist you further.

@allentax1  

[allentax1]

Thanks so much!  The IRA/SEP/SIMPLE box wasn't checked when I imported the 1099-R.  Manually checking it fixed the issue!  Thank you!!

[RachelW33]

You're welcome!

@allentax1 

[ldagguba]

hi there, I have same issue discussed here for my 2023 tax return. 

In my case, when i import, my IRA/SEP/SIMPLE box is automatically checked. I am following everything exactly described in your steps but end up getting taxes on Roth conversion. 

i deleted everything several times and followed the below steps - 

1) start with recording traditional IRA - exact steps from your STEP1. Like others have mentioned, i dont see a choice to chose which portion of traditional IRA is non deductible. I got a summary screen where IRA deduction is zero. 

2) go to wages -> 1099 R import. I followed everything exactly marking SEP/SIMPLE BOX and also mentioned the entire money is cashed into a ROTH IRA. I end up getting taxed for the conversion money.

Not sure why it is acting different for me. Kindly help. 

[shawntellgreathouse]

wonderful and correct thanks