My spouse and I have identical 1099-R forms. We both did a backdoor Roth IRA conversion. However, TurboTax shows my spouse's contribution as income and mine isn't. Why?

[user0229]

I can't figure out why TurboTax is counting my spouse's contribution of $6000 in 2019 as income. I've entered the forms for both of us several times and each time, my conversion isn't taxed and my spouse's is. The only difference between us is that I have a W-2 ($100k+) and my spouse does not. I thought nonworking spouses could also do a backdoor Roth conversion -- is this not the case?

[macuser_22]

Be sure you entered both the contribution and the 1099-R for the proper spouse.

Here is my instructions for a backdoor Roth - they would apply separately for each spouse.   Something must be different for your spouse.

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  If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself.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 2019 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 2019.     (Usually zero unless you also made a 2018 or earlier non-deductible contribution. If you do have prior year basis then enter the last filed 8606 line 14 value.).

Enter the 2019 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 2019, 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

[user0229]

Thanks macuser_22. Unfortunately, I followed your instructions exactly and it's still showing my nonworking spouse's contribution ($6,000) as taxable in the 1040 form.

Here's what I'm doing:

1. Start on "Traditional IRA and Roth IRA" screen
2. Check "Traditional IRA" for both me and my spouse. Leave Roth IRA unchecked.
3. Is This a Repayment of a Retirement Distribution? No
4. Tell Us How Much You Contributed: $6000
5. Tell Us How Much You Transferred: $0
6. Any Excess IRA Contributions Before 2019? No
   
7. Any Nondeductible Contributions to NAME's IRA? Yes
8. Let's Find Your IRA Basis. Total Basis As of December 18, 2018: $5500
   
   1. Explanation: I contributed $5500 on Dec 30 2018 and $6000 on Jan 2, 2019, then converted both to Roth.
9. Tell Us the Value of All Your Traditional IRA Accounts: $0
   
10. Is This a Repayment of a Retirement Distribution? No
    
11. [Spouse] Tell Us How Much You Contributed: $6000
    
12. [Spouse] Did You Change Your Mind? No
    
13. [Spouse] Any Excess IRA Contributions Before 2019? No
    
14. [Spouse] Any Nondeductible Contributions to NAME's IRA? Yes
    
15. [Spouse] Let's Find Your IRA Basis: $5500 (same as my own)
    
16. Income Too High To Deduct an IRA Contribution. Continue
    
17. [Spouse] Choose Not to Deduct IRA Contributions: Yes, $6000
    
    1. Note: changing this figure makes no difference. No matter what I put, my taxes don't change.
18. Your IRA Deduction Summary: $0
    1. If I put $0 in #17, this figure is $6000. But my 1040 still shows $6000 as taxable no matter what. The only way to get rid of the $6000 taxable is to delete my spouse's 1099-R entirely.

Any ideas? Thanks again.

[dmertz]

Double-check that you did not indicate that $6,000 of your spouses's $6,000 traditional contribution for 2019 was made between January 1, 2020 and April 15, 2020.

[user0229]

@dmertz Yep, confirmed. I didn't select that the contribution was after Jan 1 2020.

[dmertz]

I think the only way to figure this out is for you to be able to examine the details of your tax return, particularly the Forms 1099-R, Forms 8606, the IRA Contribution Worksheet and the IRA Information Worksheet.  You'll need to pay for TurboTax before you can download the pdf with all forms and worksheets.

[user0229]

Update: I signed back in today and discovered that the issue had been fixed. Presumably a change was made on TurboTax's end that fixed it. Whew!

[Fanatic]

So I experienced the same thing as the OP and  I checked all the above posts with no luck.   I looked into it further and found that my Modified Adjusted Gross Income (MAGI) did not require utilizing a backdoor Roth IRA.  As a result, TurboTax says my wife's conversion is taxable and mine is not.  I'm not exactly sure if this is correct.

Once I bumped my MAGI up to where I would need to to utilize the backdoor Roth, it solved the issue.

Thanks!

Edit: I started a new thread related to this topic as my situation was slightly different and the community responded with a good explanation/solution.  Link provided here.