Incorrect Basis on IRA contributions

[Alison13]

Here is my timeline on IRA (post tax) contributions: 

2022: contributed 725, basis 725

2023: contributed 1675, basis 2400

2024: contributed 2800, basis 5200

2025: contributed 3700, basis 8900. 

TurboTax identifying a taxable amount of 2400.  

When TurboTax asks my total basis at the end of 2024 I entered 5200. 

Why am I getting 2400 as taxable and how can I fix it? Is it possible it’s only “seeing” 2024 and 2025 basis?

[dmertz]

Distributions are a proportionate mix of basis and pre-tax amounts.  If less than your entire basis is being applied when determining the taxable amount, it implies that you did not have a zero balance in traditional IRAs at the end of 2025.

Knowing that the taxable amount is $2,400 says nothing about the amount of the distribution, the amount of the year-end balance, or the amount of basis being applied to the distribution.  You can view the calculation of the taxable amounts on Form 8606 Part I and if TurboTax puts asterisks on lines 13 and 15, on the Taxable IRA Distribution Worksheet.

[Alison13]

I did not have any distributions and the balance of the traditional IRA was $0 at the end of the year. I utilize the backdoor method and didn’t have any investment gains in the traditional IRA account.  From my understanding, I shouldn’t have any taxable amount this year. 

[ThomasM125]

You did have a distribution if you did a backdoor IRA. You shouldn't have any taxable income from it this year.

The distribution would have been $3,700, the amount you rolled from the traditional IRA to the ROTH IRA. You would get a Form 1099-R reporting that. You would enter that in TurboTax and would enter $5,200 when asked for the basis in your IRA's, and enter $0 for the balance in IRA's at the end of the year. Also, you need to enter a non-deductible IRA contribution of $3,700. 

If you did all of this, I suggest you delete the Form 1099-R entry and see if that removes the taxable income. If so, re-enter it. If you then have the same problem, delete the Form 1099-R entry again and also zero out the IRA contribution entry and start the process over. There must have been an errant entry somewhere, as I duplicated the process and did not have any trouble.

[Alison13]

I figured it out. I converted a traditional IRA that was 3 years old to Roth this year. It was just coincident that the taxable amount on that conversion was the exact same amount as my basis from those 2 years. So the amount was correct. The odds of that are crazy but I did the math and it checks out. Thank you for responding!