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Level 2
posted Mar 22, 2022 10:33:43 PM

TurboTax error in calculating excess Roth IRA contribution penalty

My MAGI (Line 11 on for 2021 tax year 1040) is 250K but 170K of which is a conversion from Traditional IRA to Roth IRA.   So according to IRA publication https://www.irs.gov/publications/p590a#en_US_2019_publink[phone number removed], worksheet Modified Adjusted Gross Income for Roth IRA Purposes, the MAGI is only 80K for Roth IRA purpose, well  under the 208K contribution limit for married file jointly.    However, Turbo tax still calculated the penalty and said that this is excess  contribution due to our MAGI is over 208K.    Any one else experience this?   Seems like a TurboTax error for the 2021 year.  

0 2 1287
2 Replies
Expert Alumni
Mar 23, 2022 6:09:18 AM

I could not reproduce this error. TurboTax correctly subtracted the Roth conversion from the AGI to determine MAGI and I was able to contribute to a Roth based on the MAGI. 

 

Was the conversion reported to you on Form 1099-R as a withdrawal from your IRA? If so, make sure it is reported this way:

  1. Go to Federal > Wages & Income > Retirement Plans & Social Security > IRA, 401(k), Pension Plan Withdrawals (1099-R) and click Start / Revisit.
  2. Add your 1099-R with all the information exactly as it is reported to you. 
  3. Confirm whether or not the IRA/SEP/Simple box is checked.
  4. After a few more screens, Tell us if you moved the money through a rollover or conversion select I converted some or all of it to a Roth IRA and confirm you converted the entire amount.

At that point, your ability to contribute to a Roth IRA should not take this income into consideration:

 

  1. In the Deductions & Credits section of your Federal return, scroll down to Retirement and Investments. Click Show More and click Revisit/Start next to Traditional and Roth IRA Contributions.
  2. Select Roth IRA
  3. Answer Is this a Repayment of a Retirement Distribution
  4. Enter your Roth contributions for the year. This does not include the amount you converted from a traditional IRA, only the additional amount you contributed in 2021, up to $6,000 or $7,000 if you are over the age of 50. 
  5. Continue through the questions. If you over-contributed you will come to a screen that says Your Roth Contribution Was Too High. If you do not see this screen, but instead Your IRA Deduction Summary, then you should be okay. 

Level 2
Mar 23, 2022 10:09:12 PM

Followed the detailed instructions and this time worked!  Thank you @RaifH