forgot to complete back door Roth in 2021

[uberdr8]

Hi, in 2021, I contributed $6,000 into a traditional IRA and forgot to do a conversion into a Roth IRA account. What should I do now if I want to do back door Roth in 2022 as well?

My tax professional filed form 8606 for my 2021 tax returns claiming the $6,000. 

Should I put another $6,000 for 2022 and then convert $12,000 into a Roth IRA for 2022? Will I be able to take advantage for my 2021 contribution as well?

[DanaB27]

Yes, if you can make a $6,000 nontaxable contribution for 2022 and then convert the $12,000 into a Roth IRA. The 2022 contribution and conversion will both be reported on your 2022 return. Any earnings you had before the conversion will be taxable. 

Yes, you will get the benefit from your 2021 contribution. You will enter the $6,000 basis from your 2021 Form 8606 line 14 during the interview. Only the earnings should be taxable.

Instructions for your 2022 tax return:

To enter the nondeductible contribution to the traditional IRA:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed ($6,000)
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” since you had a nondeductible contribution before this tax year.
9. Enter the $6,000 basis in the Traditional IRA from your 2021 Form 8606.
10. 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 the 1099-R distribution/conversion: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Your 1099-R Entries" screen click "continue"
6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[peppertax]

I am in a similar situation. I made my first contribution ($6k) to a Traditional IRA in 2021, but forgot to convert it.

I made another $6k contribution in 2022, and converted the whole amount. At that point, the balance on the account was about $11k. I would expect to claim a $1k loss, correct? How do I make sure this is filed correctly?

[DanaB27]

No, you cannot claim a loss but you will have a basis left on line 14 on the 2022 Form 8606 to carry over to future years.

You should have entered the nondeductible traditional IRA contribution on your 2021 tax return and have a 2021 Form 8606 with the basis on line 14. This basis will be entered on your 2022 tax return.

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
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 the 1099-R conversion made in 2022: 

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

@peppertax 

[peppertax]

Thank you very much!