I entered info for my 1099R that is from my backdoor roth IRA and yet it is reducing my refund amount. Why is it affecting how much my return will be?

[JulieS]

It sounds like you didn't enter your IRA basis. There are two steps to report a Backdoor Roth in TurboTax.  Based on your question, you skipped the first step.

First, take care of the Traditional IRA contribution:

1. Search for IRA contributions using the search box in the upper right corner .
2. Click on the Jump to link.
3. Check the box showing that you contributed to a Traditional IRA. 
4. The next screen asks you to verify that you contributed to a Traditional IRA, choose Yes.
5. The next screen asks if the contribution was a repayment of a retirement distribution, choose No.
6. Next, enter the amount that was contributed to the Traditional IRA.
7. The next screen is asking if you “recharacterized” the contribution.  This is different from a conversion, so the answer is No.
8. On the next screen, is a question about whether you are covered by a retirement plan at work.  Answer according to your situation. 
9. Following that, is a question about Excess IRA Contributions.  Answer this according to your situation.
10. The next question is, "Were there any nondeductible contributions to the IRA?"  The answer here is Yes.
11. The next page asks for the basis of the Traditional IRA.  If you have never made nondeductible contributions in the past and kept them in the Traditional IRA, your basis is zero.  Otherwise, enter the amount shown as total basis on your most recently filed Form 8606.

If the first step doesn't solve your problem, review your 1099-R following these steps:

1. Search for 1099-R, distribution from an IRA using the search box in the upper right corner.
2. Click on the Jump to link.
3. Enter the information exactly as it appears on your Form 1099-R.  Pay special attention to Box 2b, Box 7, and the IRA/SEP/SIMPLE check box.  Click Continue.
4. The next screen asks whether you inherited the IRA.  Answer No.
5. The next screen asks what you did with the money.  Answer I moved the money to another retirement account.
6. Then, choose I converted all of this money to a Roth IRA account. 
7. Finally, there will be a question asking if any of the money was moved back to the traditional IRA.  Answer No.

One final note, if the Traditional IRA earned any money before it was converted to the Roth IRA, those earnings will be taxable on your return. 

[JenNC]

In the Turbotax CD questionairre, for Traditional IRA and Roth IRA, If I put non-deductible funds into an IRA in Jan'20 for 2019 tax year, then plan to convert these funds to a Roth before Apr 2020, for the Question "Select the kind of IRA(s) you will contribute to this year, do I select both IRA and Roth or just IRA?

When I entered my IRA and Roth contributions using the Turbotax questions, my refund decreased.  I don't think it should have changed.  I contributed the $7000 for 2019 tax year and in Jan 2019 I contributed $6500 to IRA then converted these $ to Roth 4 wks later.

[DaveF1006]

You do owe tax if you converted a Traditional IRA to a Roth IRA because you transferring a plan that has pre-tax dollars to a plan that has after tax dollars. the main reason to do this is that you won't have as many restrictions in handling your Roth account like you do with the Traditional IRA. So that $6500 conversion results in a taxable event.

[macuser_22]

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@JenNC wrote:

In the Turbotax CD questionairre, for Traditional IRA and Roth IRA, If I put non-deductible funds into an IRA in Jan'20 for 2019 tax year, then plan to convert these funds to a Roth before Apr 2020, for the Question "Select the kind of IRA(s) you will contribute to this year, do I select both IRA and Roth or just IRA?

When I entered my IRA and Roth contributions using the Turbotax questions, my refund decreased.  I don't think it should have changed.  I contributed the $7000 for 2019 tax year and in Jan 2019 I contributed $6500 to IRA then converted these $ to Roth 4 wks later.

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[JenNC]

I put after-tax dollars in my traditional IRA so I shouldn't be paying tax. 

[macuser_22]

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@JenNC wrote:

In the Turbotax CD questionairre, for Traditional IRA and Roth IRA, If I put non-deductible funds into an IRA in Jan'20 for 2019 tax year, then plan to convert these funds to a Roth before Apr 2020, for the Question "Select the kind of IRA(s) you will contribute to this year, do I select both IRA and Roth or just IRA?

When I entered my IRA and Roth contributions using the Turbotax questions, my refund decreased.  I don't think it should have changed.  I contributed the $7000 for 2019 tax year and in Jan 2019 I contributed $6500 to IRA then converted these $ to Roth 4 wks later.

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My post above did not post my comments so I will retry.

If you contributed a non-deductible contribution in 2020 *for* 2019 the  enter that into the IRA contribution section.  That should produce a 8606 for with the contribution  on lines 1 and 4.

It makes no difference when in 2020 you do the conversion, it will be a 2020 conversion if done after December 31,2019.   The 2019 non-deductible contribution will apply only to conversions done after December 31, 2019.   While you can *contribute* to a 2019 IRA prior to Apr 15, the non-deductible part is not retroactive to 2019 and the Apr 15 date does not apply to conversions.

[JenNC]

In the questionnaire, when it asks how much of the $7000 contribution to my 2019 IRA did I make between Jan and Apr 2020, if I answer $7000, it shows that I owe tax on it. 

Should I not answer that question?

[macuser_22]

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@JenNC wrote:

In the questionnaire, when it asks how much of the $7000 contribution to my 2019 IRA did I make between Jan and Apr 2020, if I answer $7000, it shows that I owe tax on it. 

Should I not answer that question?

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You owe tax on what?    You are not taxed on a contribution.  You are taxed on a *distribution*.  Did you have a 2019 distribution and have a 2019 1099-R?

[JenNC]

I see your point.  I made an after-tax 2018 contribution to my IRA in early 2019, then converted it to my Roth and closed the IRA.  I have a 1099-R for this transaction.  In Jan 2020 I made an after tax contribution to my IRA for 2019.  I'll convert this to my Roth before the April deadline.  

For my 2019 return, in the Turbotax CD questionairre, when I acknowledge that my 2019 IRA contribution occurred between Jan-Apr 2020, my return changes from me getting a refund to owing taxes.  This is frustrating, it doesn't make sense to me and I don't know how to fix it.  I do know that going forward I will make my contributions in the tax year, not the following year.

I would appreciate any help you can offer.

[macuser_22]

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@JenNC wrote:

I see your point.  I made an after-tax 2018 contribution to my IRA in early 2019, then converted it to my Roth and closed the IRA.

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Then when the interview asks if you tracked non-deductible contributions, answer yes and enter the 2018 8606 form line 14 amount from the 2018 non-deductible contribution that you reported in 2018 to the IRS on a 8606 form.

[JenNC]

That worked!  Thanks.  I didn't understand the significance of the "total basis".  i thought it needed to be zero.  What does it mean?

[macuser_22]

"Basis" is the amount of after-tax contributors that you did not deduct.     By contributing money that you already paid income tax on and then not deducting it when contribution to a Traditional IRA, means that you do not pay the tax again with you withdraw those contributions.

However, you can NEVER withdraw ONLY the nondeductible part - it must be prorated over the entire value of ALL Traditional IRA accounts which include SEP and SIMPLE IRA's. (For tax purposes you only have ONE Traditional IRA which can be split between as many different accounts as you want, but for tax purposes they are all added together).

For example using rough figures: if you had $60K of nondeductible contributions in an IRA with a total value of $600K (10:1 ratio), then when you take a $60K distribution from any IRA account $6,000 would be nontaxable and $54,000 would be taxable (same 10:1 ratio) , with the remaining $54K of basis staying in the IRA for future distributions. As long as there is any money in the IRA, there will be some basis.

TurboTax will ask for your non-deductible "basis" and then the *Total Value* of *all* Traditional IRA, SEP and SIMPLE accounts as of Dec 31, of the tax year. That is so the prorating of the basis can be properly proportioned between the current years distribution and the remaining IRA value. That is done on the 8606 form.

[mlp520]

just asking a question about the basis.

I entered the 2 step process for the back door roth as listed in this posting.  I did not understand what the basis is and I think I answered incorrectly.  Here are the details:

1. I contributed 6K to a traditional IRA and moved that to a Roth IRA in the same year (2019).  My balance is zero in the traditional IRA on 12/31/2019

2. the gross distribution on the 1099-R is 6001.23 (got 1.23 in dividends/interest)

3. when I was asked what the basis is, I entered 6001.23.  Was I correct or should I have entered 6000?

4. the max limit is 6K for the year, so I should be paying a penalty on the $1.  I don't know how to go back and pay the 6% on that $1 since Turbotax.  I know it's not much, but I don't want to find out years later that I needed to fix that.  

How to do pay the penalty in TurboTax?  Thanks.

[macuser_22]

Your basis is the amount of the non deductible contribution.  Any gains is not basis.   You enter your 2019 contribution in the IRA contribution section that will create a 8606 form with the basis on line 1.   The "enter basis" question asks for *prior* years basis, not 2019 basis.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR  Use the "Tools" menu  (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.