Prior year plus current year backdoor Roth correctly reflected on 1099-R, but incorrectly taxed in TurboTax. How do I fix it?

[sadinar]

In January, I made a current plus prior year contribution for the full amount of both tax years in my IRA. These two contributions were the only money I had in any traditional IRA. Shortly afterward, I did a Roth backdoor conversion on that money bringing the total value of all my traditional IRA accounts to $0.
The 1099-R I received correctly shows the withdrawal of $12k and some change and I owe taxes on the change.
TurboTax, however, keeps putting $6k and some change down as taxable and I don't see any way to correct it.
Is there a way to tell it to include the contribution for the prior tax year? I do need to pay taxes on that small additional amount that accumulated before the backdoor happened.

[DanaB27 · Accepted solution]

Yes, you should have filed Form 8606 with your 2021 return and will enter the $6,000 basis from line 14  of the 2021 Form 8606 during the interview. You can either enter it when you enter your IRA contribution (step 8 ) or when you enter the information in the retirement section (step 6). Please review the steps below.

To enter the nondeductible contribution to the traditional IRA:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter the 1099-R conversion: 

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 "Review your 1099-R info" screen click "Continue"
6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[sadinar]

Perfect, thank you!