Can't enter a nondeductible traditional IRA contribution

[Ronnen]

On May 4, 2020 I made a tax-year-2020 $7,000 nondeductible traditional IRA contribution, and on the next day re-characterized it as a Roth IRA contribution.

I've spent several hours trying to get Turbotax Home & Business 2020 to recognize the traditional IRA contribution as nondeductible, but line 1 of form 8606-T remains blank. I've also tried entering the value 7,000 on line 1 of the form without success.

I've read several posts about reporting a backdoor Roth IRA contribution in TurboTax, to no avail.

Here are my EasySteps:

Personal>Deductions & Credits>Retirement and Investments>Traditional and Roth IRA Contributions

Select the kind of IRA(s) you own or will contribute to for 2020: Traditional IRA, Roth IRA

Is This a Repayment of a Retirement Distribution?: No

Tell Us How Much You Contributed: Your total 2020 traditional IRA contributions: 7,000; How much between Jan 1, 2021 and Apr 15, 2021: 0

Tell Us How Much You Transferred: Amount Switched from a Traditional IRA Contribution to a Roth IRA Contribution: 7,000

Your IRA Explanation Statement: (entered a statement)

Enter Excess Amount: Your Prior Year Excess IRA Contribution: 0

Any Nondeductible Contributions to your IRA from 2019 or prior years: Yes [I made a similar re-characterization in tax year 2019 in the amount of $5,476, but did not use Turbotax last year]

Let's Find Your IRA Basis: Total Basis as of Dec 31, 2019: $5,476 [from line 14 of my 2019 Form 8606]

Roth IRA Contributions: Did you make a Roth IRA contribution for 2020? No [since it says not to include the $7,000 that I originally contributed to a traditional IRA but later converted to a Roth IRA]

Withdraw from Your Roth IRA Before 2020? No

Enter Prior Year Roth IRA Contributions: Roth IRA Contributions prior to 2020: (entered value)

Tell Us the Years: 2019

Enter 2019 Conversions: 2019 Taxable Conversions: 0; 2019 Nontaxable Conversions: 5,476

Adjust Roth IRA Due to Divorce: No

Enter Excess Contributions: Your Excess Roth IRA Contributions for Prior Years: 0

Tell us the Value of your Roth IRA: (entered value)

Outcomes: Your Roth Contribution was Too High
You Currently Have a Penalty: Contribution Withdrawn Before Due Date of Your Return: 0

Your IRA Deduction Summary: Don't qualify; deduction is zero.

I've also tried ignoring the 2019 re-characterization, but that did not help me get a non-blank value in line 1 of form 8606-T.

Any help would be appreciated, but it would be ideal if you could first try the steps above.

[DanaB27]

The backdoor Roth IRA will only work if you convert your traditional IRA to Roth IRA. It does not work when you recharacterize your traditional IRA as a Roth contribution. 

Recharacterization your contribution means the traditional IRA contribution will be switched to a Roth contribution. It will be like you have not contributed to the traditional IRA but that you have contributed to the Roth IRA. Please see Traditional and Roth IRA: Recharacterize vs Convert for additional information.

This is important did you tell your bank to recharacterize the contributions or to convert money from the traditional IRA to Roth IRA?

If you did a conversion then you need to change the answer to: Tell Us How Much You Transferred: Amount Switched from a Traditional IRA Contribution to a Roth IRA Contribution: 0 

Please review the backdoor instructions below.

To enter the nondeductible contribution to the traditional IRA (pay attention to step 8!):

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes”
10. If you had a basis in the Traditional IRA before then enter the amount.
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

To enter the 1099-R distribution/conversion: 

1. Click "Personal Income" on the top
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?"
12. Answer the questions about the basis

[Ronnen]

Thanks, @DanaB27. I verified that these were conversions rather than re-characterizations, then revised my TurboTax entries accordingly.

[taroking]

I never get to the option to make the non deductible IRA part of the question.

I am using TurboTax Premier 2021.

[DanaB27]

The question to make the IRA contribution nondeductible will not show up if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. Then your contribution is automatically made nondeductible.

Please see IRA deduction limits for details.

@taroking

[silentmaster]

@DanaB27 . Both I and my wife contributed to the backdoor roth on3/2022. I and my wife are both covered by a retirement plan. So I don't see the Step 1, Q-11.  The deduction is automatically non-deductible.  If I do step 2, meaning if I create 1099-R for me and my wife as you described, my tax is increasing significantly. Is it mandatory to conclude Step 2 i.e enter 1099-R ?

[RaifH]

Since you made the contribution to a traditional IRA and then conducted the conversion to a Roth in 2022, you will not be getting a 1099-R for this transaction until next year. The steps remain the same, but you will not have to worry about step 2 until next year. If the only balance in your traditional IRAs is from these contributions, the conversion will not be taxable. 

For tax year 2021, you only have to report the contribution to your traditional IRA. 

@silentmaster

[s9231]

My AGI / MAGI are too high for my IRA contribution to be deductible.  But TurboTax calculates it as a deduction.  (e.g. If I put in "0" for contribution, my tax due increases; if I put in "6,000" for contribution, my tax due decreases).

also, there is no prompt asking if THIS YEAR's deuction is deductible.  But that makes sense because TurboTax should be calculating it on its own.

What's going on?

[MarilynG]

Yes, TurboTax would tell you after entering your IRA Contribution (on the follow-up screens) that it was not deductible, and ask if you want to make a non-deductible contribution.

If you have entered all your Income items, and you don't get a screen telling you that you have an Excess Contribution, and asking if you want to make it a 'non-deductible' contribution, then your contribution is deductible.

Here's more info on IRA Contributions.

@s9231

[BruceQing]

I was reporting IRA conversion using Turbotax, follow below steps:

To enter the nondeductible contribution to the traditional IRA (pay attention to step 8!):

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes”
10. If you had a basis in the Traditional IRA before then enter the amount.
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

But I was unable to get the "“Choose Not to Deduct IRA Contributions” screen.

How to fix this issue?

Thanks,

[ErnieS0]

You are not doing anything wrong. Choosing to make part of your IRA contribution non-deductible is the same thing as choosing not to deduct IRA contributions. The amount of non-deductible contributions is not deducted on your tax return.

On "Your IRA Deduction Summary,"  Your IRA Deduction amount should be your contribution less your nondeductible amount. If you chose to make your entire contribution non-deductible, the deduction would be $0.

Generally, a Roth IRA contribution offers better tax advantages than a non-deductible traditional IRA contribution. If you want to claim a partial IRA deduction, you can contribute the deductible portion to the traditional IRA and the non-deductible portion to a Roth.

@BruceQing

[BruceQing]

Thank you!

I did $7000 traditional IRA  for tax year 2022 on 2/21/2023, then converted this $7000 to Roth IRA on 2/28/2023.

as I did this on 2023, so I didnt get the 1099-R form for the above transaction this year( I will get 1099-R in 2024). But I still need to report the traditional IRA contribution and Roth IRA conversion on 2022 Tax filing.

TurboTax provided below instructions:

To enter the nondeductible contribution to the traditional IRA (pay attention to step 8!):

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes”
10. If you had a basis in the Traditional IRA before then enter the amount.
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

My problem is I am not able to get to Step 11, I can view the 8606 form it generated, it only listed the $7000 traditional IRA contribution on 8606 Part 1, there is no Roth IRA conversion on the 8608 Part 2.

[AnnetteB6]

The current version of the instructions for entering a back door Roth IRA conversion makes note in step 11 that if none of your Traditional IRA contribution is eligible to be deducted, then you will not see the question about making part of it nondeductible.  The default is that all of it will be considered nondeductible.

Once you have entered the non-deductible Traditional IRA contribution as part of your 2022 return, you are done.  You will enter the Form 1099-R reporting the distribution from the Traditional IRA and subsequent conversion to Roth IRA as part of your 2023 tax return.  The distribution and conversion occurred in 2023, not 2022.  

@BruceQing 

[SomeDumbProgrammer]

Thanks for the peace of mind!