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2023 Backdoor Roth Filing Incorrectly Shows Excess Contribution

In 2023 I opened IRA accounts for the first time ever. My 2022 MAGI was under the 2022 Roth limit and I contributed $6000.00 non-deductible (after-tax) money for the 2022 tax year into a Roth IRA at Fidelity called (Roth_2022_Account). My 2023 MAGI was over the 2023 Roth limit and I contributed $6500.00 non-deductible (after-tax) money for the 2023 tax year into a Traditional IRA at Fidelity (called Trad_2023_Account). The following day, I performed a recharacterization of the Traditional IRA and put all of the money ($6500.88) it into a new Roth IRA (Roth_2023_Account), leaving the Trad_2023_Account with 0.00 balance. In January I receieved a 1099-R showing $6500.88 in Boxes 1 and 2a, both boxes checked in 2b, Distribution Code 2 in Box 7, and the IRA/SEP/SIMPLE box checked. 

I have filled out TurboTax Online Deluxe, Federal > Deductions & Credits > Traditional and Roth Contributions as follows.
Page 1 - Traditional and Roth IRA:  [check] Traditional > Continue
Page 2 - Is this a Repayment of a Retirement Distribution? [No]
Page 3 - Tell us how much you contributed 
                       Total 2023 IRA Contributions: [6500.00]
                       Contributed in 2024: [0.00]
Page 4 - Tell us how much you Transferred
                      Amount Switched from Traditional to Roth: [6500.00]
Page 5 - Your IRA Explanation Statement
                     Date of the Original Contribution: Aug 15
                     Date of the Recharacterization: Aug 16
                     The Amount Recharacterized: $6500
                     The Amount Transferred (Recharacterization plus earnings or losses): $6500.00
                     Reason for the Recharacterization: Backdoor
Page 6 - Any Excess IRA Contributions Before 2023? : [No]
Page 7 - Any Non-deductible Contributions to your IRA? ...to your traditional IRA in 2022 or prior years ...: [No]
Page 8 - Your Income Is Too High to Contribute. 
                     Your MAGI is over the limit... the $6500 you put into your Roth IRA is considered an excess                                     contribution {Continue]
Page 9 - You Currently Have a Penalty ....

I believe I have correctly performed the Backdoor Roth conversion and filled out all of the pages correctly, and that I should not have any penalty. Is the TurboTax Online software in error? I thought it was supposed to fill out a Form 8606 to resolve this issue but it does not do that. 

Please advise.

Sincerely,
Jack

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1 Best answer

Accepted Solutions
dmertz
Level 15

2023 Backdoor Roth Filing Incorrectly Shows Excess Contribution

"Page 4 - Tell us how much you Transferred
                      Amount Switched from Traditional to Roth: [6500.00]"

 

That's where you made the mistake.  You did not switch (recharacterize) the traditional IRA contribution.  You did a Roth conversion, reported on the code-2 Form 1099-R.  A recharacterization would have been reported on a code-N Form 1099-R.

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4 Replies
AnnetteB6
Employee Tax Expert

2023 Backdoor Roth Filing Incorrectly Shows Excess Contribution

Since you were under the income limit for 2022 and you contributed to your Roth IRA directly, that transaction does not factor in at all.

 

So, essentially you are trying to report your 2023 contribution to a Traditional IRA and subsequent conversion (not recharacterization) to a Roth IRA.  There are two main steps to get this transaction reported in your return.  The first is to report the non-deductible Traditional IRA contribution.  Then enter the Form 1099-R reporting the distribution from the Traditional IRA which was then converted to a Roth IRA.  

 

Take a look at the following TurboTax help article for a step-by-step guide to entering this information:

 

How do I enter a backdoor Roth IRA conversion?
 

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dmertz
Level 15

2023 Backdoor Roth Filing Incorrectly Shows Excess Contribution

"Page 4 - Tell us how much you Transferred
                      Amount Switched from Traditional to Roth: [6500.00]"

 

That's where you made the mistake.  You did not switch (recharacterize) the traditional IRA contribution.  You did a Roth conversion, reported on the code-2 Form 1099-R.  A recharacterization would have been reported on a code-N Form 1099-R.

2023 Backdoor Roth Filing Incorrectly Shows Excess Contribution

Thanks. I had already that and it actually didn't help. Specically in Step 1, the instructions diverged from the form after number 9.

2023 Backdoor Roth Filing Incorrectly Shows Excess Contribution

Thanks I changed my response and was able to finish filing. 

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