Conversion some ampumt from Traditional IRA (with balance) to Roth IRA

[redmarlen]

First some history. In November 2024 I contributed USD7000 to traditional IRA fpr 2024 (balance of Traditional IRA at that point became USD 48389.46). Balance as of 12/31/2024 was USD46779.41. 02/11/2025 I reilized I can not contribute to Traditional IRA before taxes, so I decided to convert my contribution for 2024 that to Roth IRA, which I did on 02/11/2025 (at that time balance of traditional IRA was USD 48220.31). On my 2024 tax return I reported conversion of USD7000 from traditional IRA to Roth IRA and didn't pay any taxes on it. On form 1099-R for 2025 I see that conversion was for the amount of USD6912.87. On the form 8606 for 2024 I see numbers only in the fields: 1) 7000 2) 0 3) 7000 14) 7000. Had I reported everything correctly for 2024?

Now for 2025 tax return. As I understood I will need to pay approximately 46779.41/(46779.41+7000) = 87% from 7000 taxable, so approximate amount of taxes shall be USD 1461. Is that correct? When I input that to turbotax it showed approximately that amount, but when I added that I am going to contribute USD 7000 to traditional IRA for 2025 (and I again can not do it before tax due to income amount for 2025) it reversed taxes as if I shall not pay anything for my conversion made for 2024. What am I doing incorrectly? Is it possible to see my 2025 turbotax return form 8606 for 2025 before sending it to IRS? What shall I see on that form to check that everything is correct?

Also Turbotax is asking me do I want to track tax basis of my IRA, and I do, but I don't know how to answer questions there

[RobertB4444]

It sounds like you did everything ok last year.  At least when I try to emulate you those are the numbers I get on my form.

As far as the reversal for this year the only thing I can think is that the system believes that the $7,000 that you are moving to the Roth is a reversal of the excess contribution.  You need to go back to the point where you entered the contribution and review your entries to be sure that the contribution has been entered as a non-deductible excess new contribution.   (May be easier to delete the entries for this year and start over.)

If the error is persisting come back here and tell us where you entered the $7,000 so we can walk through it.

[redmarlen]

Thank you. When I deleted my Traditional IRA contribution for 2025 my tax refund decreased for appr. USD1600 which is appr. amount I calculated I need to pay due to my Traditional IRA had balance when I convert part of it to Roth IRA. Is that correct at this point? 

This year I wanted to do the same - contribute USD7000 to Traditional IRA (after tax because of income) and convert it to Roth IRA (because I am not eligible to contribute to Roth IRA straight). So I started to do Traditional IRA contribution for 2025. I answered "No" to "Did Maryna recharacterize any of the Traditional IRA contributions for 2025 over to Roth IRA? This does not include conversions or rollovers". I answered "Yes" to "Did Maryna make any nondeductible IRA contributions to your Traditional IRA from 2024or prior years?". I answered 7000 to "If Maryna made any nondeductible contributions in prior years, look at Maryna's most recent Form 8606. Find the box called total basis and enter the number from that box below. If you never filed a Form 8606 just enter 0 (zero).

What was Maryna's total basis as of December 31, 2024?" After answering this question Turbotax increased my refund on those USD 1600, so I am doing mistake somewhere in these answers. Please help

[MarilynG1]

 Converting a non-deductible IRA contribution to a Roth IRA is a two-step process.

1. Enter the Non-Deductible Contribution:
   • Go to Federal > Deductions & Credits.
   • Find Traditional & Roth IRA Contributions and select Start/Update.
   • Answer "Yes" to contributing to a Traditional IRA, then "No" to recharacterizing.
   • When asked, select "Yes" to make part of your contribution nondeductible, and enter the contribution amount.
2. Enter the 1099-R (The Conversion):
   • Go to Federal > Wages & Income.
   • Find IRA, 401(k), Pension Plan Withdrawals (1099-R) and select Start/Update.
   • If you have a 1099-R, enter it. If not, you may need to add one to report the conversion.
   • When asked about "What did you do with the money", select I converted some or all of it to a Roth IRA.
   • Select Yes, all of this money was converted to a Roth IRA

@redmarlen 

[redmarlen]

Thank you, but all this was already done, and it doesn't help. The question is how do I pay taxes on the amount I converted from Traditional IRA (with previous balance) to Roth IRA in 2024 (I estimated I shall pay about USD 1500 because traditional IRA had balance, am I correct?) ? When I input 1099 R my refund is decreased bu about USD 1600, so at this step it seems correct. When I input my after tax traditional IRA contribution for 2025 (new one, I am going to make it now and convert to roth IRA again) it adds that USD 1600 back, and I am not payimg taxes on my balance for converting part of Traditional IRA to Roth IRA for 2024. What shall I do? I wrote exactly what questions Turbotax is asking, what I am replying to them and when it adds USD 1600 back. What shall I do, please help

[MarilynG1]

No, if you reported the non-deductible contribution and conversion to Roth correctly, you would have no tax consequence, so what you did is correct.

@redmarlen 

[redmarlen]

But how can it be no tax consequences for conversion to Roth IRA, if my Traditional IRA (before tax) had balance (contributed before tax), I added to it USD7000 after tax in 2024, and since they were after tax I converted USD6912 to Roth IRA in 2025 for 2024, and Traditional IRA was left with balance after the conversion? How can it be that this operationces does not have tax consequences? And it had tax consequences after I added 1099 R, taxes were about USD 1600. But they dissaper when I add my new contribution to traditional IRA i plan to make now for 2025

[DianeW777]

Here is the explanation.  Since the Traditional IRA was not allowed to be deducted, even though you were allowed and made the allowable contribution, once you transferred it to a Roth there was no tax consequence.

If you had any deductible traditional IRA contributions and you moved/converted any of those funds to a Roth IRA, then tax consequences will occur.

@redmarlen 

[redmarlen]

Does the tax consequences of my Traditional IRA conversion to Roth IRA for 2024 depend on my Traditional IRA contributions for 2025? Because Turbo tax access concequences of conversion for 2024 for USD 1600 payable to IRS. 

After that I can stop, not make any contributions to traditional IRA for 2025 and I shall pay USD 1600 for money converted for 2024.

BUT if I contribute to Traditional IRA for 2025, I somehow shall pay IRS USD 1600 less immidiately, and I am not allowed to do before tax contributions to Traditional IRA this year. How can you explain this?

Here is the confirmation of your own tax expert that I do own taxes for this conversion, expert estimated thos taxes USD 1600 same as me. How do I pay them through Turbotax? As turbotax reverses them when I add new after tax Traditional IRA contribution for 2025 which shall not be related to this conversion in any way.

[RobertB4444]

This is called a Backdoor Roth contribution.  And you haven't made a mistake in 2025, but it sounds like you did in 2024.

When you put the money in your traditional IRA you are being taxed on it.  You're being taxed on it because you aren't allowed to make a contribution to a traditional IRA.  You also aren't allowed to make a contribution directly to a Roth IRA.  

What you are allowed to do is roll money from a traditional IRA into a Roth IRA.  So you put money into the traditional IRA - where you aren't allowed to have it - and then you immediately move it into a Roth.  Now, the balance in your traditional IRA is zero.  You took all of the money out.  And, since you didn't take a deduction for the $7,000 you put into the traditional IRA, you don't owe any tax on it when it moves into the Roth.

This is a very normal thing and you should go back and amend your 2024 return to get your $1600 back.

Here is a nice TurboTax article on Backdoor Roths.

[redmarlen]

No I had balance in Traditional IRA before tax before putting there after tax money, and I had balance after I converted some amount of traditional IRA to Roth IRA. Because I had that balance I owe about USD 1600 taxes now. Where did I make mistake in 2024? I have form 8606 with total basis of USD7000 (it turned out I concerted USD6912). So what mistake shall I correct, please? And If I have mistake there, why when I input 1099R Turbotax is estimating my taxes correctly as USD1600 owed, but when I input my new contribution for 2025 of after tax money to Traditional IRA turbotax reverses that USD1600 owed as I now shall not pay that USD1600?

[AmyC]

The mistake is not being able to input the value of the IRA. Robert is right that a zero balance would be simple; but, that isn't what you have. You will need to pay tax on that percentage we discussed earlier in the other thread. Once we get your IRA balance added.

[redmarlen]

Thank you! How do I add it in online version? I am opening it through Metlife to use the discount.

Can we create case for Turbotax support to look into this as well? I am asking this same question here from the time the session was opened in the morning (7 hours ago), and I still can't understand what do I do with this. I am afraid it will not be solved in 1 hour left till the end of the meeting.

[RobertB4444]

Ok, you are going to have to go back to the questions about the basis of your IRA.  The basis is the amount that you put into the IRA.  This is how the system will determine the taxable amount.  You said that you didn't know how to answer those questions.  Which questions can't you answer?

[redmarlen]

In which section do you mean? Wages where I input 1099-R (and put 7000 as basis from form 8606) or deductions where i put info about Traditional IRA contributions for the 2025?

Turbotax estimates that I owd USD 1600 (sounds right) after i input 1099 R info with basis of 7000 from 8606. And turbotax reverses USD 1600 when I input info about Traditional IRA contributions for 2025. Where am I doing the mistake?