Backdoor Roth IRA Contribution in 2025 for 2024 tax year

[silverngold1889]

I contributed the maximum amount to a traditional IRA in January 2025 for the 2024 tax year and then transferred those funds to a Roth IRA to utilize the backdoor contribution method because I make more than the authorized amount to simply contribute to a Roth IRA. When I enter this information into Turbotax I am getting an error that I can't contribute to a Roth IRA. How do I account for this so that I do not get an error? 

[MindyB]

Since the conversion occurred in 2025, you will not report that on your 2024 tax return.  You'll only report the non-deductible IRA contribution made in 2025 for 2024. Next year, using the 1099-R you will receive for the year 2025, you will then report the conversion

Here are the steps to report the nondeductible IRA contribution in TurboTax Online, from How do I enter a backdoor Roth IRA conversion?:

"Step 1:  Enter the Non-Deductible Contribution to a Traditional IRA

1. Go to Deductions & Credits
2. On the Your tax break screen, locate and select the Retirement and Investments section, then select Start or Revisit next to Traditional IRA and Roth IRA.
3. On the Traditional IRA and Roth IRA screen, check the Traditional IRA box and select Continue.
4. On the Is This a Repayment of a Retirement Distribution? screen, select No.
5. On the Tell Us How Much You Contributed screen, enter the amount contributed and select Continue.
6. On the Did You Change Your Mind? screen, select No, then answer the questions on the following screens.
7. When you reach the Choose Not to Deduct IRA Contributions screen:
8. Select Yes, make part of my IRA contribution nondeductible.
9. Enter the amount you contributed.
10. If none of your contributions can be deducted, you won't see the option to make part of it nondeductible. Instead, you will see the message Income Too High To Deduct an IRA Contribution, and the full amount of your contribution will automatically be nondeductible.
11. Select Continue.
12. On the Your IRA Deduction Summary screen, review the info and select Continue.

[dengla]

I contributed $7000 for 2024 and $7000 for 2025 in April of 2025 to a traditional IRA.  It was then converted to a Roth IRA thru the backdoor method.  I should only be taxed on the 979.00 that was gained after moving over but the tax software keeps showing 7,979 as taxable income.  How do I fix this?

[DaveF1006]

TurboTax is showing $7,979 as taxable because it hasn’t connected your 1099-R (the conversion) to your nondeductible basis, the $14,000 you contributed.

To sort this out, enter your 2024 and 2025 contributions separately. This lets the software know that $14,000 of what you moved was already taxed.

1. Go to Deductions & Credits > Retirement and Investments > Traditional and Roth IRA Contributions. 
2. Check the box for Traditional IRA.
3. Enter $7,000 as your 2025 contribution.
4. Answer "No" to "Did you change your mind and recharacterize?" 
5. On the screen "Choose Not to Deduct IRA Contributions," select Yes, make part of my IRA contribution nondeductible. Enter $7,000.

Continue through the IRA interview until you see a screen asking: "Any Nondeductible Contributions to Your IRA?" or "Did you have any nondeductible contributions to your IRA from 2024 or prior years?" Select Yes. Then enter Enter $7,000 as your "Total basis as of December 31, 2024." If you already filed your 2024 return, this number should match Line 14 of your 2024 Form 8606.

Now that the software knows you have $14,000 in "basis," go back to your 1099-R:

1. Go to Wages & Income > IRA, 401(k), Pension Plan Withdrawals (1099-R).
2. Edit your 1099-R.
3. After entering the form, you’ll reach a screen asking "What Did You Do With The Money?"
4. Select "I moved it to another retirement account."
5. Then select "I converted all of this money to a Roth IRA."

Now, your taxable amount should be $979 because and recognize the $14,000 was a basis and none of it should be taxed.