Backdoor Roth Saying Excess Contribution

[superduper]

Hi,

I contributed in Feb 2022 to my traditional IRA $6,000 for tax year 2021, and $6,000 for tax year 2022. I converted all of this later in Feb 2022 to Roth. 

When I enter this data in Turbotax, it's saying I have an excess $6,000 contribution and states penalties. Is that correct? How do i enter this correctly in TurboTax. 

[DanaB27 · Accepted solution]

No, you shouldn't have any penalties if you have enough taxable compensation to make the contribution. Please only enter $6,000 as the contribution for 2022.

You should have entered the $6,000 contribution for 2021 on your 2021 tax return and have Form 8606 with a $6,000 basis on line 14 (this will be entered on your 2022 tax return either in step 9 when you enter your contribution or in step 7 when entering the conversion).

To enter the nondeductible contribution to the traditional IRA for 2022:

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 of $6,000
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 2021 Form 8606 line 14 (since you had a basis in the prior year) $6,000
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 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” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review 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 2021 Form 8606 ($6,000) and the value of all traditional, SEP, and SIMPLE IRAs

[superduper]

Thanks so much for your help 

So if I understand correct. I keek the 1099-R amount at $12,000. 

But change the following 

- Total 2022 IRA Contribution = $6,000

- Put cost basis at end of Dec 2021 = 6,000 (instead of 0)

- Value of total IRA at end of Dec 2022 = 0 (since i converted it all)

Please let me know

[DanaB27]

Yes, that is correct you enter the $12,000 Form 1099-R. Contribution for 2022 is $6,000 and the basis is $6,000 (from 2021 Form 8606 line 14) and the value is $0 (if you didn’t have any other traditional/SEP/SIMPLE IRAs).

@superduper