TurboTax generates Form5329 Addtl Tax for conversion of Trad IRA to Roth IRA. Treats the distribution from Traditional IRA as excess contribution & calculates 6% penalty

[mark_harpst]

The instructions for the backdoor Roth are incomplete or incorrect. How can this be done on TurboTax?

[DanaB27]

Please make sure you do not enter the conversion as a contribution to Roth or as a recharacterization from traditional IRA to Roth IRA. Please review the steps below.

To enter the nondeductible contribution to the traditional IRA for 2023:

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 for the Roth 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

Please be aware, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:

• $6,500 ($7,500 if you're age 50 or older), or
• if less, your taxable compensation for the year