topic Backdoor Roth conversion in Retirement tax questions

Backdoor Roth conversion

rashku4512 — Wed, 12 Feb 2025 14:25:15 GMT

I have questions about backdoor conversion to Roth IRA and the max contribution I can make etc. Can TurboxTax advisors help me with the process and execution?

Re: Backdoor Roth conversion

MindyB — Wed, 12 Feb 2025 15:00:28 GMT

Yes. You can contribute the maximum yearly amount to a traditional IRA, then convert it to a Roth, commonly referred to as a "Backdoor Roth". For both 2024 and 2025, the yearly IRA maximum contribution was $7,000. Both years allow an additional $1,000 if age 50 or older. ‌You still have time to make a contribution (until 4/15/25) and have it count as a 2024 contribution if you haven't done so.

What you will do is open up a brokerage account, opening both a traditional and Roth IRA. Then, make your contribution directly to the traditional IRA. ‌Keep checking your account until the funds settle.‌ As soon as the funds settle, immediately withdraw the funds and choose to deposit them into the Roth. ‌The reason that you want to do this right away is that any earnings you make while the money is in the IRA become taxable upon conversion.

Then, you will receive a 1099-R from your brokerage for the year you made the withdrawal. ‌In TurboTax you will enter the 1099-R and indicate that a rollover occurred. Here's our guide to reporting a backdoor Roth: How do I enter a backdoor Roth IRA conversion?

Re: Backdoor Roth conversion

rashku4512 — Wed, 12 Feb 2025 15:48:12 GMT

Thank you for the inputs. Here is my exact question. I have a traditional IRA account which has been funded for few years now. I have cash and equity assets that have appreciated over the period. Year 2022 and 2023, I did non-deductible contributions of $7000 each. Filed an ammendment this year to add form 8606 (not sure why it was not present in previous TT filiings). From this year onwards I want to do Roth IRA contribution and the way I have read is to contribute to Traditional IRA then do a backdoor conversion to Roth (have high MAGI) as you stated earlier. Now if, I want to convert the 22, 23 contributions and 24 & 25 ones I will do this year with no tax how can I do it? I see some articles that suggest to keep the prev. contributions and new contributions in the IRA account and move all deductible cash/assets to 401k account. It states 401k account is not looked at when pro-rata tax calculation is computed. So to avoid getting taxed based on the pro-rata tax calcuation these will be the steps to follow:

1. keep prev. years non-deductible contributions in account.

2. add new contributions e.g. 2024 and 2025 to the IRA account.

3. move/transfer other assets/cash to 401K account.

4. transfer 100% of IRA account to Roth using backdoor conversion.

5. since all 100% value is non-deductible contribution, it will get transferred 100% tax free to Roth account.

6. later years keep doing backdoor conversion.

Please let me know if my understanding is right. Thank you.

Re: Backdoor Roth conversion

DanaB27 — Sun, 16 Feb 2025 12:35:17 GMT

Yes you can do a reverse rollover where you rollover IRA money to a company plan, like a 401(k). Only pre-tax funds can be rolled from an IRA to a company plan. Therefore, you would isolate the basis and could start the Backdoor Roth procedure fresh. But it only works if your employer allows it, not all plans do.

Since all this happens in 2025 you would report it on your 2025 tax return.

You would only report your nondeductible traditional IRA contribution for 2024 on your 2024 return:

Login to your TurboTax Account
Click on "Search" on the top right and type “IRA contributions”
Click on “Jump to IRA contributions"
Select “traditional IRA”
Answer “No” to “Is This a Repayment of a Retirement Distribution?”
Enter the amount you contributed
Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
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.
Enter your basis in the Traditional IRA from your 2023 Form 8606 line 14 (if you had a basis in the prior year)
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).

If you do not get the “Any Nondeductible Contributions to Your IRA?” screen then please see Why is my backdoor Roth IRA conversion being taxed? to sign up for updates.

Re: Backdoor Roth conversion

fanfare — Sun, 16 Feb 2025 17:18:05 GMT

generally you are better off in a self-directed IRA than your employer's 401k because you have more flexibility,

AND

you can convert the money to Roth over time as your tax situation permits.

Once you have IRA basis, you can no longer do tax free conversion to roth .

@rashku4512

Re: Backdoor Roth conversion

Rabernadelli — Wed, 12 Mar 2025 00:00:48 GMT

When I attempt to follow the instructions provided for how to fill out the tax return on turbo tax for the backdoor Roth the steps are not the same as what I see on my end. Please advise.

Re: Backdoor Roth conversion

AnnetteB6 — Wed, 12 Mar 2025 13:51:36 GMT

If this is the document you are trying to follow, please provide additional information about what is different on your end or where you need help and someone will try to guide you.

How do I enter a backdoor Roth IRA conversion?

@Rabernadelli

Re: Backdoor Roth conversion

khaitran24 — Mon, 07 Apr 2025 02:12:47 GMT

This does work for me. I followed all instructions here but it stills report the 1099-R number on box 4b of my 1040.

Looks like the TurboTax software has bug on this? So annoying, it usually worked fine for me in previous years, but this year, could not figure out how to make TurboTax online remove box 4b. Looks like the software has a bug?

Anyway I can manually edit box 4b on 1040 form directly?

Re: Backdoor Roth conversion

AnnetteB6 — Mon, 07 Apr 2025 15:55:32 GMT

No, you will not be able to edit box 4b on Form 1040 directly using TurboTax Online.

If you are trying to report a backdoor Roth IRA conversion and the amount of the distribution from your Traditional IRA is showing as taxable when you indicate that it was converted to a Roth IRA, then there are a couple of things that you need to check.

First, be sure that you have entered the non-deductible Traditional IRA contribution as part of your return or be sure that Form 8606 is showing that you have a basis in the Traditional IRA that is being converted. If there is not a basis from non-deductible contributions, then the Roth conversion will be taxable.

Also, if you have more than one Traditional IRA and there are pre-tax funds in some of the accounts, then at least a portion of the conversion to the Roth IRA will be taxable.

@khaitran24