My 2018 tax return doesn't include Form 8606 to report my Roth IRA conversion from after tax traditional IRA, but only has one explanation statement, is it acceptable?

[dmertz]

All Roth conversions from traditional IRAs must be reported on Form 8606 Part II.  No explanation statement is needed nor would TurboTax ask yo to prepare one for a Roth conversion.

Did you enter the Form 1099-R that reports the distribution from the traditional account and answer the follow-up questions to indicate that the funds were moved to a Roth IRA?

What is the code in box 7 of the Form 1099-R provided by the payer?

Is the IRA/SEP/SIMPLE box marked?

If the IRA/SEP/SIMPLE box is not marked it indicates that the distribution was from a traditional account in a qualified retirement plan, is not a distribution from a traditional IRA and is not reportable on Form 8606.

If the code in box 7 is code R or code N, the Form 1099-R is reporting a recharacterization, not a Roth conversion, is not reportable on Form 8606, but does require an explanation statement.  If is a 2018 Form 1099-R, a code R recharacterization was reportable with your 2017 tax return while a code N recharacterization is reportable with your 2018 tax return.

[ruiyingd]

Thanks for your quick response, code in box 7 is 2, the IRA/SEP/SIMPLE box is marked. My turbo tax return has a Recharacterization Explanation session in the end like " Reason for the Recharacterization: After Tax contribution from Traditional IRA to convert to Roth IRA." I guess i still need to report 8606 form myself to IRS right? 

[ruiyingd]

I'm not sure how Turbo tax ended up reporting my Roth conversion as recharacterization, how to avoid it happen again in future?

[macuser_22]

If you were attempting to do a so called "Backdoor Roth" by making  non-deductible Traditional IRA contribution and then converting that to a Roth IRA then you made a mistake (or misinterpreted) the "Did you change your mind"  in the IRA contribution interview and switched to a Roth IRA instead.  That is a recharacterization and NOT a conversion.  You must complete the Traditional IRA contribution and then enter the 1099-R into the 1099-R section and mark THAT as a Roth conversion.

Here is my method of entering a back door Roth.  Note the bold underlined part:

This so-called “back-door Roth” method ONLY works if you have NO OTHER Traditional IRA accounts.  If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself.  Only if you started with NO Traditional, SEP & SIMPLE IRA and ended up with a zero amount in ALL Traditional, SEP & SIMPLE IRA accounts will this Roth conversion not be taxable.

First you must enter your Traditional IRA contributions (if there were 2018 contributions).

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

Be SURE to answer the follow up that the are choosing to make this contribution NON-DEDUCTIBLE - if that screen comes up. (DO NOT say that you moved (recharacterized) the money to a Roth) – this is a conversion, not a recharactorazition.

Then enter the 1099-R that shows the distribution.

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),,
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

Answer the follow-up questions answer the question that you moved the money to another retirement. The screen will open up with choices of where it was moved. Choose you converted it to Roth IRA.

When asked if you have made any non-deductible contributions say " "yes" if you did then enter the non-deductible contributions made for tax years before 2018.     (Usually zero unless you also made a 2017 or earlier non-deductible contribution. If you do have prior year basis then enter the last filed 8606 line 14 value.).

Enter the 2018 year end value of your Traditional IRA a "0" (zero) - if it is in fact zero - this tax free Roth conversion will not work if it is not zero.

[If you had any other Traditional IRA at the end of 2018, then the nondeductible "basis" must be pro-rated over the current distribution and the total IRA value and only a portion of the Roth conversion will be non taxable and part will be taxable, with the remaining non-deductible basis carrying forward for future distributions. You can never only withdrew the nondeductible basis as long as the IRA exists and has a value more than zero.]

The non-deductible amount of your contribution will be subtracted from the taxable amount of the conversion on then 8606 form and enter on line 4a of them 1040 form and a zero taxable amount on line 4b if you did it right.

Also see this TurboTax FAQ:
https://ttlc.intuit.com/questions/4350747-how-do-i-enter-a-backdoor-roth-ira-conversion

[dmertz]

Did you already file your 2018 tax return inappropriately reporting this as a recharacterization?  If so, you'll need to amend your 2018 tax return by making the entries agree with what macuser_22 described, otherwise just make the corrections before filing.  The corrections will add Form 8606 and need to remove the explanation statement.  If the explanation statement does not automatically disappear you can delete it manually, in TurboTax online by going to Tax Tools -> Tools -> Delete a form.