2025 Tax return - Form 8606 showing wrong information for backdoor Roth conversion

[dipanjan108]

My spouse deposited $7000 in a Traditional IRA in 2024 and got a full deduction. So Form 8606 was not generated for her on the 2024 tax return.

She deposited $7000 in traditional IRA in 2025 and did a backdoor ROTH conversion. The form 8606 that got generated should have shown $0 as non taxable amount. But it is showing a value of $3808 as taxable amount which is wrong. How do I correct this in the 2025 tax return in Turbo Tax?

[dipanjan108]

There is an Asterix (*) sign beside the $ value in line number 13 on form 8606. But Turbo tax is not showing the breakdown for calculations. 

[AnnetteB6]

The asterisk means that the taxable amount is being calculated on the Taxable IRA Distribution Worksheet, which is included as part of your return if you choose to print 'all government and TurboTax worksheets' or you can view it in Forms if you are using a desktop version of TurboTax.  The worksheet is based on the IRS worksheet linked here.

Since a deductible contribution of $7000 was made in 2024 and a non-deductible contribution was made in 2025, at least a portion of the amount converted to the Roth IRA will be taxable.  Without taking any earnings into account, if $7000 was converted to the Roth IRA, then $3500 will be taxable.  

Every distribution from a Traditional IRA is a mixture of pre-tax and after-tax money.  Each distribution takes into account all Traditional IRAs that you may have when determining whether the distribution is taxable.  The taxable amount is proportional to the part of the account that is pre-tax money (deductible contributions and earnings).  

So even if you only converted the $7000 that was a non-deductible contribution, the deductible contribution from 2024 is taken into account as well (along with any earnings in the account) and makes part of the conversion taxable.

@dipanjan108