Backdoor Roth Contribution in arrears

[kam349]

Hello,

Have read quite a few related posts but have not come across my exact situation and am struggling with how to record backdoor roth for 2021, 2022, and 2023.  Contributed 7K twice so far. Early in 2022 (applied to 2021) and then again early 2023 (applied to 2022).  Our income is too high for regular roth and we are over 50 years old so did backdoor both times (I believe it is considered a recharacterization ?). I'm confused as to which tax year we include which amounts and how to record it in the tool as I didn't get a 1099R in 2021, I got one late in 2022 after I filed the 2021 taxes. Do I need to amend my 2021 tax return (we got a refund) or could I potentially submit a 8606 on its own for 2021? I also need to determine how to handle it for 2022 as well, this time before I submit our taxes (step by step help ideal).  2021 was done via online version. This year I got desktop as was told it was better to work with given the situation. I even upgraded to professional help and after an hour the person on the phone couldn't help me.  Appreciate any help you can provide. Thanks.

[MaryK4]

You will want to file the Form 8606 for 2021- and you are correct that you can send it separately to the address on the form instead of a full amendment.  You can use TurboTax to amend the 2021 to create the 8606 then print and mail the 8606 only (follow the same steps for this year's entry).  The directions for entering the 2022 Backdoor:   How do I enter a backdoor Roth IRA conversion?

If you need help while you are in TurboTax, add to this thread or start a new one- there are lots of experienced TurboTax users that can help with specific questions.

[kam349]

Thanks for help! Two follow up questions if I could:

1) Hopefully filled out the 2021 8606 correctly to set up for 2022. Essentially captured $7000 in 'basis for 2021' (amount given early 2022 but applied to 2021), submitted it separately. Over 50 years old.

2) Now that I've input everything in for 2022 tax year, is there a way in the forms or anywhere I can validate things were captured correctly before I submit? For example - nothing shows under income for retirement distribution - should it? Secondly under IRA deductions it shows traditional IRA basis total as $7000, and basis carryover as of 12/31/22 as $14,000. Does that sound right (7000 from #1 above plus another 7000 we applied to 2022 but didn't give until Feb 2023)?

Thanks for time.

[DanaB27]

You should have the $7,000 basis listed on your 2021 Form 8606 lines 1, 3, and 14 (assuming you didn't make any conversion in 2021).

Your 2022 Form 8606 should have $7,000 on lines 1 and 2. $14,000 on line 3. $7,000 on line 4 and $7,000 on line 5.

On Form 1040 you will have the distribution amount from Form 1099-R on line 4a and the taxable portion will be on line 4b (if you didn't have any earnings before the conversion then this will be $0).

To enter the nondeductible contribution to the traditional IRA for 2022:

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 and the amount contributed in 2023 for 2022
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” if you had nondeductible contributions before this tax year
10. Enter your basis in the Traditional IRA from your 2021 Form 8606 line 14 (if you had a basis in the prior year)
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

To enter Form 1099-R for the conversion: 

1. Click "Federal Taxes" on the top and select "Wages & Income"
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?" if you had any nondeductible contributions in prior years.
12. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

@kam349 

[kam349]

Thanks Dana - super helpful detail. I followed along but I didn't get all the same question prompts and when I went to validate things in my forms section I'm missing some pieces. I even went in and re-entered the 1099-R manually and nothing changed. Now I'm concerned my 2022 information isn't correct. For example:

1) my 1040 4a and 4b is blank - shouldn't 4a be 7000 and 4b be 0?

2) 2022 8606 lines 4 and 5 are blank

It won't let me override any lines in the forms section and not sure how to get this resolved. Suggestions?

Thanks

[kam349]

I followed your guidance, very helpful and much appreciated. However, my outcome isn't matching up entirely with what you described. When I go into 2022 forms it appears I'm maybe missing a few things:

1) 1040 line 4a is blank - shouldn't it be 7000? 4b also blank - shouldn't it be $0?

2) 8606 - lines 2& 3 seem correct, but lines 4 and 5 are blank - shouldn't they both also be 7000?

Wasn't prompted with all the questions/steps you outlined. Trying to figure out how to best rectify at this point. I logged out, went back in, etc. thinking maybe the questions would refresh but they didn't. Suggestions?

Thanks

Kim

[fanfare]

the amount converted to Roth is completely independent of your non-deductible contribution to the IRA.

It is not a recharacterization.

To the extent that the tax-free portion of basis is less than the amount, you will pay tax on that taxable portion.

This is the calculation on Form 8606.

@kam349 

You know what you did so your Form 8606 and Form 1040 Line 4 should reflect that.

[fanfare]

8606 lines 4,5 can't both be blank. something is wrong.

TurboTax does funny things when the contribution for the tax year was made after Jan1.

This can cause confusion. This is unfortunate.

Does your Form 8606 print with "*" on lines 13 and/or 15a ?

@kam349 

[kam349]

Both 13 and 15a on 8606 are also blank. 

[fanfare]

you should delete any 1099-Rs you entered and start over in your attempt to generate a correct tax return.

@kam349