IRA distribution withholding non-deductible contribution

[withcontra2]

How do I enter a non-deductible IRA contribution if I have no earned income?

This is a repayment of withholding from an IRA distribution, and should be a non-deductible contribution,

but I have not yet found how to enter this 2022 contribution into TurboTax.

This may affect the pro-rata rule for a Roth Conversion, and the 5498 form put it in lIne 2 "rollover Contribution".

[GeorgeM777]

You cannot, given that you have no earned income.  Reinvesting the tax withholding won't work because the IRS requires that other funds be used to make up for the amount withheld.  However, in your situation, with no earned income, you won't be able to contribute other funds to your traditional IRA.  The IRS provides the following information regarding roll-overs and tax withholding from a traditional IRA:

How much can I roll over if taxes were withheld from my distribution?

If you have not elected a direct rollover, in the case of a distribution from a retirement plan, or you have not elected out of withholding in the case of a distribution from an IRA, your plan administrator or IRA trustee will withhold taxes from your distribution.  If you later roll the distribution over within 60 days, you must use other funds to make up for the amount withheld.

The above information was obtained from the following link:

Rollovers of Retirement Plan and IRA Distributions

@withcontra2 

[withcontra2]

Thanks.  I was looking at Publication 590-A

The amount withheld is part of the distribution. If you roll over less than the full amount of the distribution, you may have to include in your income the amount you don’t roll over. However, you can make up the amount withheld with funds from other sources.

I am trying to let Turbotax know that I used other sources of post-tax funds.

[DanaB27]

To confirm you made a conversion from your traditional IRA to Roth IRA but had taxes withheld. You made nondeductible contributions to your traditional IRA in prior years but not for 2022.

You will enter your Form 1099-R for the conversion where you indicate the conversion and that you replaced the taxes withheld with your own money. Please make sure you enter your prior year basis (nondeductible contributions) when TurboTax asks.

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 "Did you convert the gross amount of $XXXX (Box 1) to a Roth IRA?" screen select "Yes, all of this money was converted to a Roth IRA"
6. On the "Review your 1099-R info" screen click "Continue"
7. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
8. 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

@withcontra2 

[withcontra2]

Thank you Employee Tax Expert for your reply.

I made a conversion from my traditional IRA to Roth IRA and had taxes withheld.

I made a nondeductible contribution in 2022 within 30 days to replace the taxes withheld, from post tax funds.

This nondeductible 'contribution' does not show up in the 1099-R form, but does show up in

a 5498 form. 

If I try to enter it as an IRA contribution later in turbotax, it wants to charge a 6% Excess IRA Contribution.

[fanfare]

did you deposit the amount of withholding into your Roth?

you never report any part of a conversion as a contribution.

It completes the amount you converted to Roth IRA.

Tell TurboTax you converted the full amount.

@withcontra2 

[withcontra2]

As this is not a contribution, may have to submit it to TurboTax as two separate distribution parts.

First would be the ordinary Roth Conversion, with no withholding, no paying back with your own money.

Second would be the 60-day rollover, with withholding and paying back with your own money.

The first would be taxable, the second tax-free.