Backdoor Roth question

[7ur60user]

Hello, 

Here is my situation. Me and my Wife cannot contribute to Roth because of  the earning limit. We can do backdoor Roth.

    (a) Wife contributed to her IRA in Dec 2022 for year Dec 2022.

    (b) The account accrued $294 interest until I noticed it in Jan 2024.

    (c) Jan 2024, she rolled-over the amount $6294 to Roth

    (d) Nov 2024, she contributed $8000 for year 2024.

    (e) Dec 2024, she rolled-over amount $8000 to IRA.

She received a 1099-R with amount $14,294. Now of that amount only $294 should be taxable but TurboTax is calculating the tax basis to be $5,562 and asking to pay tax on (14294 - 5562 = 8732). How can I fix this?

thanks in advance.

[DanaB27]

She should have reported the nondeductible Traditional IRA contribution on her 2022 return and should have a 2022 Form 8606 with the basis listed on line 14. If this is her last filed Form 8606 then you will enter this basis during the interview (steps 8 & 9 in the IRA contribution interview or steps 6 & 7 in the retirement income interview).

To enter the nondeductible contribution to the traditional IRA for 2024:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your last filed Form 8606 line 14 (if you had a basis in the prior year)
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the Form 1099-R conversion: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion" screen and choose “I converted some or all of it to a Roth IRA”
5. On the "Here's your 1099-R info" screen click "Continue"
6. Answer "Yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your last filed Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

Please see How do I enter a backdoor Roth IRA conversion?

[7ur60user]

Thank you for the detailed steps. I could get the tax-basis updated and remove double-taxed money.