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MK100
Returning Member

For non-decutible IRA backdoor convert to Roth, why would turbotax does not count the same year non-deductible traditional IRA contribution as the contribution basis

Hello,

 

I made $10k non-deucitble contribution to my traditional IRA account before Sept 2020,

 Then in Oct 2020, I made another $6k non-deductible contribution

Then in Nov 2020, I did the backdoor Roth conversion of the entire balance from the traditional IRA to Roth IRA. 

 

So, I assume in my 2020 tax return, the non-deductible IRA contribution basis for this Roth conversion would be $16k. However, Turbotax only asked the contribution basis as of Dec 21, 2019 which made my contrbution basis to be $10k.  And I need to pay tax again for the $6k non-deductible contribution made and converted in 2020. Does that make sense?

 

 

 

 

3 Replies
Critter-3
Level 15

For non-decutible IRA backdoor convert to Roth, why would turbotax does not count the same year non-deductible traditional IRA contribution as the contribution basis

You have a bigger problem because you could not put in $10,000 of contribution to an IRA for one tax year. Max allowed is $6000 (7000 if 50 or older) You over contributed for 2019 and you need to fix that issue first. 

then for the back door IRA conversion you had to enter the contribution to the traditional IRA first, call it nondeductible, and then in the 1099 – R section you indicate that you had made a conversion. If you enter everything correctly then the prior year nondeductible contribution and the current year nondeductible contribution will both be reported on the form 8606. 

macuser_22
Level 15

For non-decutible IRA backdoor convert to Roth, why would turbotax does not count the same year non-deductible traditional IRA contribution as the contribution basis

How did you do that?  Was one a 2019 contribution?

The IRA custodian should have refused the contribution if it exceeded the yearly limits of $6K (or $7K if over age 50).

 

The most you can contribute to all of your traditional and Roth IRAs is the smaller of:

For 2019 and 2020, $6,000, or $7,000 if you’re age 50 or older by the end of the year; or
your taxable compensation for the year.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Mike9241
Level 15

For non-decutible IRA backdoor convert to Roth, why would turbotax does not count the same year non-deductible traditional IRA contribution as the contribution basis

FYI a 2019 IRA contribution had to be made on or before 7/15/2020

so Turbotax is counting the entire $16K as a 2020 contribution. max less of $6K, $7K if over 50 or compensation

you had until 4/15/2021 to withdraw the excess.  now you need to report (Turbotax should do this)  excess contributions on form 5329 and pay the penalty. thus the basis is the max allowed for one year.

 

 

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