Backdoor Roth on TurboTax

[tphtph]

Hi,

Wife and I made 240,000 in 2021 and I am 56.  I thought the purpose of the backdoor Roth was to avoid the penalty, so that no matter what your income is, you won't have to pay the 6% penalty.   Is that accurate?

So in 2021, I deposited $7,000 after-tax dollars into my traditional Vanguard IRA, and then immediately opened a new Roth IRA and funded it with the same $7,000 I had just deposited.

Now in TurboTax, I'm in Deductions/Credits, Retirement & Investments, Roth IRA.    I enter all my info, and at the end it says I owe the 6% penalty.

Pretty much everywhere I read says there should be no penalty as long as I backdoored it, which I did.   I think I am perhaps entering something wrong on TurboTax?   Any help is appreciated, thanks!

[AnnetteB6 · Accepted solution]

There are two main steps to entering a backdoor Roth IRA conversion into TurboTax.  First, you have to enter the non-deductible Traditional IRA contribution.  Second, you enter the Form 1099-R reporting the distribution from the Traditional IRA and subsequent conversion to a Roth IRA.

If you are seeing a penalty being calculated, you most likely entered the Roth IRA contribution into your return.  

Take a look at the following TurboTax help article for step-by-step instructions for entering the information required to report your backdoor Roth IRA conversion:

How do I enter a backdoor Roth IRA conversion?

[tphtph]

Thank you, Annette.   Your answer and the article you suggested were perfect, and I saw what I was doing wrong.  Thank you!

For anyone else who sees this, simply follow the instructions in that article step by step, and you'll see how it works.