Backdoor Roth Conversion

[state-taxes]

How do I handle the following situation:
Earlier in 2023, I did a backdoor roth conversion from traditional IRA for the prior year (2022) which was $6k.

Later in 2023, I did a backdoor roth conversion from traditional IRA for the current year (2023) which was $6.5k.

My 1099 R for my traditional IRA then shows 12.5k. 

How can I correctly enter this + record it as a backdoor roth conversion. I've tried adding the 1099 -R form, but my federal taxes are going up each time so I believe I am doing something incorrectly.

Thank you!

[dmertz]

The 2022 traditional IRA contribution was required to have been reported on your 2022 tax return, on Form 8606 line 1 if nondeductible.  Line 14 of your 2022 From 8606 carries forward to line 2 of your 2023 Form 8606 to be added to your 2023 nondeductible traditional IRA contribution shown on line 1.  Be sure to enter your 2023 traditional IRA contribution under Deductions & Credits and do not indicate that you switched (recharacterized) your contribution to be a Roth IRA contribution.  You converted to Roth, you did not recharacterize to Roth.

[state-taxes]

My 2022 traditional IRA contribution was reported on my 2022 8606. 

Is it showing up on my 1099 R for this year as well because I did a past year contribution for 2022?

Once entering the 2023 traditional IRA contribution, how do I go about recording it as a roth conversion?

Thanks

[dmertz]

The Roth conversion is indicated by entering the From 1099-R that reports the distribution from the traditional IRA, indicating that you moved the money to another retirement account, that you did a combination of rolling over, converting and cashing out, then entering the amount that was converted to Roth. 

[AmyC]

Yes, since you made the 2022 contribution in 2023, you received a tax form related to your 2023 actions. Since you already accounted for it on your 2022 return, you should be good.

[state-taxes]

Would that be a 1099 R for my traditional IRA or a 1099 R for my roth IRA?

[dmertz]

A Roth conversion is a distribution from the traditional IRA that requires a Form 1099-R from the traditional IRA.

[state-taxes]

After entering my tIRA contributions and the roth conversion, turbotax is still adding 6k to my income and taxing me on it (which is incorrect).

Could this be because my total basis on my 8606 from last year is 0? (I don't quite understand what that means, but I can tell that my last year tax return had the roth backdoor correctly recorded, not sure if the 8606 is correctly reflecting that or not)

Would love to hear any advice, thanks

[DaveF1006]

Check line 20 on Schedule 1 to see if there is an IRA deduction amount listed there. If there is then the $6k is added back as income. if blank, then there should be no added income to report in your return. Please read this Turbo Tax link to make sure you have recorded your full conversion correctly.  Don't miss a step or deviate from the instruction.

Your current 8606 should reflect the basis of the previous year's Roth conversion if you did a Backdoor Roth for year 2022. If not, then you will need to amend your 2022 to reflect the amount of the contribution so that you will the correct basis going forward. You will also need to report this year's Roth contribution on your 8606.  Here is how to report the 8606. As an FYI, Turbo Tax do not generate 8606's automatically. You need to do this on your own.

1. Sign in to your TurboTax account.
2. Open your return, if it isn't already open.
3. Inside TurboTax, search for this exact phrase: IRA Contribution Information.
4. Select the Jump to link in the search results.
5. Proceed through the IRA section, answering questions as you go.
6. Answer Yes when you reach the screen, Any Nondeductible Contributions to Your IRA?
7. Select Continue.
8. We'll generate and fill out the 8606 behind the scenes.

I would suggest that you amend your 2022 return first so that the Basis is properly reported and then report your 2023 contribution.  This way when you add this year's contribution, the basis amount will be shown as $12,000 instead of $6000. Tracking your basis is important and used as a tool when you begin taking retirement distributions especially if you have a mix of deductible and non-deductible retirement distributions. To amend 2022.

To amend your return using Turbo Tax Online.

1. Log into Turbo Tax
2. Select Scroll down Your tax returns & documents in your landing page.
3. Select Amend (change) 2022 return. 

To amend using the 2022 Desktop Software, go to:

1. Federal Taxes
2. Other Tax Situations>other tax forms
3. Amend a return

[state-taxes]

So I checked line 20 on my schedule 1, and it is blank. However, on line 4a of my 1040, my IRA distributions are listed at $12,500, and 4b has taxable amount of $6000. It looks like it removed my $6500 roth conversion from the taxable amount but is still leaving me with the taxable amount of $6000 for my last year conversion.

Is this because my 8606 from last year has a value of 0 for total basis, and is not recording my roth conversion?

[DaveF1006]

To clarify, was your 1099R reported as $12,500 for 2023?

[state-taxes]

Yes, it looks like it is including the contribution I made for 2022 (in early 2023) which $6k. And then for 2023, it was $6.5k

[state-taxes]

Would love to hear any additional thoughts on this if possible.

Thank you

[DianeW777]

The 2022 Form 8606 line 14 should be $6,000 and this needs to be entered during the 2023 interview:
 

1. On the "Review your 1099-R info" screen click "Continue"
2. Answer "yes" to "Any nondeductible Contributions to your IRA?" since you had any nondeductible contributions in prior years.
3. Answer the questions about the basis from line 14 of your 2022 Form 8606 (should be $6,000 if you reported it correctly on your 2022 return) and the value of all traditional, SEP, and SIMPLE IRAs.

Please note the Backdoor Roth only works if all your traditional/SEP/SIMPLE IRAs are empty (value is $0 at the end of the year). Otherwise, the pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part.

• Form 8606 Instructions

[state-taxes]

So, it sounds like based on my case, I didn't enter it correctly in my 2022 return and should amend that prior to finishing up my 2023 taxes.

Is that correct?

Thank you