Traditional IRA contribution and backdoor conversion

[wk7]

I had two contributions to my traditional IRA in early 2021 when I filed for my 2020 return: 6000 for 2020, 6000 for 2021, both of which I didn't file form 8606.

In the middle of 2021, I did backdoor conversion of $12,470 (total amount of traditional IRA) to Roth IRA. I got 1099R for this conversion. The turbo tax keeps saying － Your income is too high to contribute Roth, and my contribution for 2020 is an excess contribution and will have a penalty. 

Is this because I didn't file 8606 for 2020 contribution? What should I do to correct this error? 

[DavidD66]

The reason TurboTax is saying your income is too high is not because you didn't file Form 8606.  You do need to file a Form 8606.  It can be filed by itself.  To download Form 8606 go to: Form 8606 Nondeductible IRAs 

To report your Roth Conversion:

• type 1099-R in the search box
• click on "jump to Form 1099-r"
• enter the information for your 1099-R
• Turbo Tax will ask you questions about your Traditional IRA distribution
• When you reach the screen that says, "what did you do with the money?", choose the option that says, "I moved the money to another retirement account"
• After you choose this option, another set of options will appear:
• If you converted the entire distribution to a Roth IRA, choose "I converted all of this money to a Roth IRA"
• If you only converted some of the distribution to a Roth IRA, choose, "I did a combination of rolling over, converting, and cashing out the money." If you choose this option, Turbo Tax will ask you to identify how much of the distribution was converted to a Roth IRA, and how much of the distribution was rolled over into another retirement plan.
• Next you will the screen that says, "your 1099R entries". Scroll down to the bottom of the page and click "continue". Turbo Tax will ask you more questions and you will need your 5498 Form for your Traditional IRA. A year end statement might also provide the necessary information.

[wk7]

Thanks David66.

I entered my 1099-r based on what you described. Now I got the following questions:

- Total basis as of Dec 31, 2020? (shall I put 6000 here? - even though my contribution for 2020 was in early 2021)

- Value of traditional IRAs on Dec 31, 2021 ( shall I put 12470 or 0 － given all IRA amount has been converted to Roth)

Then I did search for "IRA contribution information" and jump to the link. I got following questions:

- Total 2021 traditional IRA contributions (I put 6000)

- Amount Switched from a Traditional IRA Contribution to a Roth IRA contribution (I put 6000, if I put 12470 here, turbo tax will say over limit)

- Total basis as of Dec 31, 2020 question comes up again （I put 6000)

After that, turbotax says "the 6000 you put into a Roth is considered an excess contribution."  the fact is I didn't directly contribute into Roth. It's just I converted the 2020 contribution together with my 2021 IRA contribution together. Does turbo tax treat my 2020 IRA contribution to traditional IRA as a contribution to Roth? or the backdoor conversion only allow 6000 per year?

[FangxiaL]

Follow the two-step process to properly enter your backdoor Roth conversion:

1. Open or continue your return
2. In the search box, type ira contributions and select the Jump to link in the search results
3. Select Traditional IRA on the Traditional IRA and Roth IRA screen and Continue
4. Answer No to Is this a Repayment of a Retirement Distribution?
5. On the Tell Us How Much You Contributed screen, enter the amount contributed and continue
   • Enter $6,000 for Your total 2021 traditional IRA contributions
6. Answer No on the Did You Change Your Mind? screen
7. Answer No on Any Excess IRA Contributions Before 2021?
8. Answer Yes, I made and tracked nondeductible contributions to my IRA, or No, I did not make and track nondeductible contributions to my IRA. If you don't have any other Traditional IRA accounts, you can answer Yes
9. Enter $6,000 for Total Basis as of December 31, 2020 on the next screen
10. Answer the questions on the following screens, until you reach Choose Not to Deduct IRA Contributions. Select Yes, make part of my IRA contribution nondeductible, and enter $6,000 in the box. 

Step 2: Enter the Conversion from a Traditional IRA to a Roth IRA

 Inside TurboTax, search for 1099-r and select the Jump to link in the search results

1. Answer Yes to Did you get a 1099-R in 2021?, then Continue
   • If you land on Your 1099-R Entries screen, select Add Another 1099-R
2. Select how you want to enter your 1099-R (import or type it in yourself) and follow the instructions
3. Answer None of these apply when you reach the screen Do any of these situations apply to you?
4. Select I converted some or all of it to a Roth IRA on the Tell us if you moved the money through a rollover or conversion screen
5. Next, choose Yes, all of this money was converted to a Roth IRA
6. Continue answering questions until you come to the Your 1099-R Entries screen

To check the results of your backdoor Roth IRA conversion, see your Form 1040:

1. On the left side of your screen, select Tax Tools, then Tools
2. Under Tools Center, select View Tax Summary
3. On the left side of your screen, select Preview my 1040
   • Your backdoor Roth IRA amount should be listed on Form 1040, Line 4a  as IRA distributions
   • Taxable amount should be $470 because you had that much earnings between the time you contributed to your Traditional IRA and the time your converted it to Roth IRA, and the earnings would be taxable
   • Schedule 1, Line 20 IRA deduction, should be blank
4. Select Back on the left side of your screen to return to where you left off in TurboTax

@wk7