I opened Traditional IRA in 2018 and deposit $5500 after tax into the account , in 2019 I again deposit $5000 after tax into Traditional IRA and did conversion of $10000 to Roth IRA.
To my understanding , since my contribution to Traditional IRA is after tax money, when I did conversion to Roth IRA I don't need to pay Tax.
My question is when I enter the IRA basis and value on Turbo tax form, it calculate that I need I have taxable IRA distribution and I have no idea how it came up that value and if I entered something incorrectly ?
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You probably failed to enter the 2019 contribution into the IRA contribution section and specify that it is to be non-deductible in the interview.
If you failed to do that in 2018 also then you need to file a 2018 8606 form that shows it as non deductible on line 1, 3 & 14. You must have that 8606 line 14 value in order to claim the 2018 basis on the 2019 1099-R.
Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.
OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.
Enter a 1099-R here:
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).
OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.
Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.
[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]
You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.
That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.
NOTE: If there is an * next to line 15 then 6-15 will be blank and the calculations will be on the "Taxable IRA Distributions worksheet instead.
1) enter the 2019 IRA contribution and indicate it will be non deductible
2) enter the 1099-R and complete the following screens to indicate you had basis from 2018 that was reported on the form 8606.
3) review the return and the form 8606 to make sure the conversion is handled correctly
Thank you for the explanation and your reminder about 2018. Indeed, I didn't file 8606 form for 2018 IRA. Somehow that part never came up when I went through Turbo Tax , it also didn't came up for 2019, I had to search for it. And when I enter the non-deductible for 2019 it seems to fix the extra taxable income, so that's good.
To fix the 2018 tax, do I amend 2018 tax or just file a 8606 form ?
Thanks again , really appreciate your help!
You can file the missing 2018 8606 by itself.
The 2018 contribution should be in line 1 prior year (if any) on line 2 and total on line 3 & 14.
https://www.irs.gov/pub/irs-prior/f8606--2018.pdf
https://www.irs.gov/pub/irs-prior/i8606--2018.pdf
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