Form 8606 - Line 14 (basis) seems wrong

[jkahn001]

Friends-

I annually contribute the max non-deductible amount to my traditional IRA.  After the funds settle, I convert - typically within a day or two of the initial contribution (backdoor Roth conversion).

Heading into 2024, I had $0 in my traditional IRA accounts.  I contributed $7K (nondeductible), and by the time I converted, the account dropped by $33 (i.e. I converted $6,967 to the Roth).

I've accurately entered this information in TT.  When I preview my form 8606, I'm seeing $7K in lines 1, 3, and 5 (that seems right).  Line 13 shows $6,967, and Line 14 shows $33.

My concern is that Line 14 - which reflects my basis in traditional IRAs for 2024 and earlier - is $33.  That seems wrong.  I would expect it to be $0 (the amount left in my traditional IRA on Dec. 31, 2024) or negative $33 (the amount I lost in the account in 2024).  

A TT "expert" agreed that it should be $0, admitted it could not be changed in the TT online, and suggested I complete my taxes again on the desktop app.  Not ideal, but I'm willing to do it if that's what it takes.  Am I correct?  Or are the forms already correct?

[DavidD66]

TurboTax is correct.  You contributed $7,000 to a Traditional IRA.  You took a distribution of $6,967 (your Roth Conversion).  You still have a basis of $33. Your $33 of basis did not disappear when you took your distribution.  If you make another contribution to the Traditional IRA of $7,000 and leave it there long enough to earn $33 of interest, then do a Roth of conversion of the entire $7,033, it will have a basis of $7,033, not $7,000 with $33 of gain.    

[jkahn001]

I'm not following. In your example, the basis next year would equal the amount of the 2025 contribution plus the left over basis from the prior year (s). But that is also not how TT is calculating it.

[DanaB27]

As DavidD66 mentioned the $33 basis on line 14 on the 2024 Form 8606 is correct since you did not use this part of the basis when you converted the funds. This $33 basis will be carried forward to the next time you make nondeductible contribution or a distribution/conversion from the traditional IRA and will show up on line 2 of Form 8606.

Therefore, if you make a nondeductible contribution for 2025 of $7,000, then you will have $7,000 on line 1 and $33 on line 2 on the 2025 Form 8606. If your conversion has a gain of at least $33 then the whole basis would be used up and line 14 would show $0. If you do not have a gain with this conversion then the rest of the basis would be carried forward again until you are able to use it.