Backdoor Roth Conversions getting flagged as "excess contributions"

[deekeoski]

Thank you for your reply. I exited the Free online upgrade and went into my desktop version and had no trouble. I'm not sure where I was going wrong on the online version, but after spending hours chasing a rabbit down a hole, I don't care. 

[deekeoski]

Thank you, I reverted to the desktop version and had no trouble. Not sure what the deal was with the online version.

[ksangler]

The desktop interview continues with the following question:  Did KEN recharacterize any of the traditional IRA contributions for 2025 over to a Roth IRA contribution?  I intend to do that with the non-deductible contribution before 4/15 so should I check YES?  Or does this question pertain to only those recharacterizations that I have a 1099 in hand at this time?  So, since I do not have a1099 yet, I need to check NO and the deal with the taxes associated with a recharacterization next year for my 2026 return?  Thanks!

[dmertz]

Assuming that you will recharacterize by the deadline, you answer as if you have already done so.  Answer Yes.  If you answer No, file, then recharacterize, you would have to amend your tax return to change your answer.

Read "Did KEN recharacterize any of the traditional IRA contributions for 2025 over to a Roth IRA contribution?" as "Did (or will) KEN recharacterize any of the traditional IRA contributions for 2025 over to a Roth IRA contribution?"

[Edit}  However, a backdoor Roth involves no such transaction.  See posts below.

[baldietax]

@ksangler do you mean re-characterization to a direct Roth contribution, or conversion.

If you are doing a backdoor Roth the second step is a conversion and you should answer No to any questions about moving or recharacterizing the money to Roth in the Trad IRA contribution section, that is handled by the 1099-R (conversions are reported and taxed in the calendar year they are made - there is no 4/15 deadline to convert, only a deadline to contribute for prior tax year).

[dmertz]

baldietax makes a good point.  If you are doing a backdoor Roth, you do not  recharacterize from a traditional IRA to a Roth IRA at all.  You convert funds from a traditional IRA to a Roth IRA and that conversion is reportable on the tax return for the year in which you perform a conversion.

[ksangler]

I may be wrong about this because I can't find a definitive answer in pub 590 on recharacterizations.  Please correct me if I'm wrong but I think there needs to be an explanation on recharacterizations and conversions that the main difference that I can find is that a back door roth is used for those people who cannot contribute to a Roth due to income limits.  A recharacterization is only for those instances where you meet the income limits but decide before Apr15 that you want to move it to one or the other.  A conversion is required If you're trying to do a back door roth, and is subject to 6% tax plus 10% penalty if under age 59.5.  Am I right?

[dmertz]

Recharacterization of a traditional IRA contribution causes that contribution to be treat as if the contribution was originally made directly to a Roth IRA, subject to all of the limitations on contributing directly to a Roth IRA.  Recharacterization of a Roth IRA contribution causes that contribution to be treat as if the contribution was originally made directly to a traditional IRA, subject to all of the limitations on contributing directly to a traditional IRA. 

A Roth conversion is a rollover from a traditional IRA to a Roth IRA, includible in AGI to the same extent that it would have been includible it been distributed from the traditional IRA and not rolled over.  Roth Conversions are not subject to any early distribution penalty or excess contribution penalty.

The backdoor Roth process is an ordinary nondeductible traditional IRA contribution followed by a Roth conversion.  These are two separate, mostly independent transactions.  The only way that they interact is that first transaction adds to your basis in nondeductible traditional IRA contributions and the second transaction consumes basis in nondeductible traditional IRA. contributions.

[Seattle49er]

back door conversion from a traditional IRA account to a Roth Ira account. Getting the "excess contribution" warning. What to do to resolve? Traditional IRA has funds available for over 5 years.

[baldietax]

@Seattle49er check your entries again, follow these instructions carefully and be careful with the on-screen questions the language is very specific

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

most likely you entered the contribution with a Roth recharacterization which you did not do, you did a conversion; say No to anything to do with Roth in this section, just answer as though you only did the Trad IRA contribution step.  When you enter the 1099-R and answer those questions, it will handle the conversion step.

or less likely but can happen, you actually had an excess contribution because you didn't have enough compensation to cover the amount of the Trad IRA contribution

[ksangler]

Thanks for the response and I see what you're saying, but I'm trying to simplify the recharacterization confusion in layman's terms.  The fact that if you exceed income limitations for a Roth, you CANNOT do a recharacterization (because you can't contribute to a Roth:)). So, the ONLY option for those that exceed income limits for a Roth is to do a "back door" which is contribute to a non-deductible IRA before April 15 and convert that amount to a Roth and then you have to wait for the 1099 to add that conversion to your next years tax return.  The Roth conversion essentially can be any time during the current tax year (2026 now)  I can't find that statement in 590 and TTax instructions and the interview does not clarify that.  TTax interview confuses it by only asking if it's a recharacterization and not clarifying that limitation.  The interview questions are confusing for those trying to do a back door and hopefully will be improved next year.  Although, I may have missed it but that is not clearly stated in ttax.  Thanks! @baldietax 

[dmertz]

You can do a Roth conversion whenever you like, as long as you have traditional IRA funds to convert.

A nondeductible traditional IRA contribution simply adds you your basis and a distribution from a traditional IRA that is not rolled over to a traditional IRA consumes basis.  Other than that, the Roth conversion is independent of the traditional IRA contribution.

The confusion comes from the term "backdoor Roth" seeming to imply that these two transactions are more coupled than they actually are.  When entering a traditional IRA contribution or a Roth conversion into TurboTax, each needs to be entered without regard to the other.