Problem with two Backdoor Roth IRA conversions in one calendar year - previous tax years amount being classed as taxable

[leecox]

In Feb 2023 I did a IRA to Roth IRA conversion (backdoor Roth) for my 2022 contributions. After this I also contributed to my 2023 IRA and then did a IRA to Roth IRA conversion (backdoor Roth) for my 2023 contributions.

As expected my 1099-R form for 2023 shows a total distribution of both the 2022 and 2023 conversions of $12,500.

When filing my 2023 taxes via TurboTax online and using my 2023 1099-R form, and my basis of $6,000 from the 2022 8606 form, it is showing my 2022 conversion of $6000 as a taxable amount in field 4b on my 2023 1040.

What could be causing this? I have been through it all with two different people using the Live Expert option, and they both said everything is filled out correctly, and this amount should not be taxable. 

[DanaB27]

To confirm, you entered the $6,000 basis from your 2022 Form 8606 line 14 during the 2023 interview when TurboTax asks about "Any nondeductible Contributions to your IRA?"? Your 2023 Form 8606 line 2 should show $6,000 as basis.

Did you have any pre-tax contributions in your traditional IRA? If you had pre-tax funds in your traditional IRA then the pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part.

Please review the steps below to enter your contributions for 2023 and the conversion.

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 2022 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 Form 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 2022 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[leecox]

I am unable to follow those steps on the online version of TurboTax - it seems that they are for the desktop version of the software? However I opted to purchase the desktop software so I could have access to the worksheets and see where the error was occurring. I imported my return details from the online version, and even though I had entered $6000 as my basis for 2022 this was not being used on the 8606 form work sheet. I went through the process numerous times of deleting all my 1099-R forms and reentering all the details include entering the 2022 basis, but for some reason the online version never uses my 2022 basis correctly.

Using the desktop version I have entered the exact same details and it is using my 2022 basis correctly, which I can see on the worksheets.

[fanfare]

Just one more reason not to use the Online version.