Backdoor Roth in Pennsylvania

Forum|Forum|6 years ago
March 15, 2020
1 reply
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Hi!

In 2019 I contributed $6,000 to a non-deductible IRA and then converted it into a roth IRA (backdoor IRA). I am having trouble with inputting my backdoor IRA on turbotax. The federal part seems correct, but when I get to the Pennsylvania tax section, it keeps wanting to list the $6,000 as income for Pennsylvania. I have it coded as an early distribution from a retirement plan. It lists the gross distribution as the $6,000, a cost basis of $0.00 and then PA Income of $6,000. Would it be correct to list the basis as $6,000 in this case? Thank you so much!!

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Best answer by DeanM15

As this is a contribution to a non-deductible IRA, your basis would be $6000. You paid Federal and PA tax on this income already.

However, your basis should be carried forward from the federal IRA. I would check your federal form first, before changing anything on the PA return.

To pull up a copy of your 2019 Form 1040 and Schedules 1 to 3, follow these directions:

You should be signed in and working in TurboTax
Click on Federal in the main left-hand side menu
Click Tax Tools, then Tools in the main left-hand side menu
In the pop-up window, click on View Tax Summary
The left-hand menu has now changed, click on View My 1040

You should see that none of the 6K is coming through as income on Line 4 of the 1040. You should also see no Penalty on Line 6 of Schedule 2.

DeanM15Answer

Level 10

As this is a contribution to a non-deductible IRA, your basis would be $6000. You paid Federal and PA tax on this income already.

However, your basis should be carried forward from the federal IRA. I would check your federal form first, before changing anything on the PA return.

To pull up a copy of your 2019 Form 1040 and Schedules 1 to 3, follow these directions:

You should be signed in and working in TurboTax
Click on Federal in the main left-hand side menu
Click Tax Tools, then Tools in the main left-hand side menu
In the pop-up window, click on View Tax Summary
The left-hand menu has now changed, click on View My 1040

You should see that none of the 6K is coming through as income on Line 4 of the 1040. You should also see no Penalty on Line 6 of Schedule 2.

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GlennAmmons

Level 2

I am no expert, but I don't think this answer is correct. If the IRA earned money before it was converted, then you _do_ owe federal taxes on that gain. But according to PA:

https://revenue-pa.custhelp.com/app/answers/detail/a_id/274/~/taxability-of-roth-iras-according-to-pa-income-tax-rules

you do _not_ owe PA taxes on the gain, as long as you really did convert the entire distribution to a Roth.

Put another way, you should not use your basis for federal tax purposes as your basis for PA purposes. I think this all stems from the fact that PA taxes both IRA and Roth IRA contributions when you make them, and doesn't tax distributions from either kind of IRA when you take them in retirement.

I marked mine in the dropdown as a "rollover", because the page I linked above gives the same rules for "roll overs and plan conversions".