Roth IRA recategorize to Trad IRA, backdoor conversion back to Roth

[gchan]

Hello,

Please bare with in trying to explain the situation.

1.  I contributed $6500 in 2023 to my Roth IRA but my 2023 AGI exceeded the limits for Roth.

2.  So I recategorize in 2024 before tax filing, to Trad IRA but here was capital gains total transferred $6,835.47.

3.  I converted Trad IRA back to Roth of $6,835.47.

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My questions:

1. Is there any action I need to do for 2023 or 2024.

2. What do I need to do with the extra capital gains $335.47.

3.  How would I do what is needed on the TurboTax software. If someone can walk me through the steps.

Thanks.

[ThomasM125]

For the $6,500 ROTH IRA distribution, you need to enter a substitute Form 1099-R in TurboTax as follows:

To enter a refund of excess IRA contributions in the current year follow these steps:

1. Go to the personal income section of TurboTax 
2. Find the Retirement Plans and Social Security menu option
3. Start or Update IRA, 401(k), Pension Plan Withdrawals (1099-R)
4. Choose Add Another 1099-R
5. Choose I'll type it in myself
6. On the screen that says Tell Us Which 1099-R You Have choose I need to prepare a Substitute 1099-R
7. Enter the distribution amount in box 1 of the substitute 1099-R
8. Enter the earnings in box 2(a)
9. Enter code "P" and "J" in box 7 
10. When asked about the year on the form 1099-R, say it is for the year following the year you are working on

For the backdoor IRA, enter a traditional IRA contribution in the Deductions and Credits section of TurboTax, then Retirements and Investments, then Traditional and Roth IRA Contributions. Indicate that your traditional IRA contribution is non-deductible when asked in the program:

Since the rollover will occur in 2024, you will wait until you receive that Form 1099-R in 2025 to report the rollover on your 2024 tax return. When you do that, you will enter the Form 1099-R and indicate by answering questions in the program that you converted non-deductible IRA funds to a ROTH IRA.