Hi,
I have been struggling to make form 8606 in Turbotax file properly.
Here is the situation.
1. I made a non-deductible contributions for 2018 and 2019 in Mar-2019 for $6500 and $7000 respectively.
2. Then I rolled over these contributions to Roth IRA.
3. When I am filling the information in Form 8606, it is treating only a portion of the contributions as non-taxable conversion and other portion to be taxable conversion (where it should treat the entire conversion as non-taxable).
Anyone, else running into this issue?
Thanks
Do you have other IRA's that are traditional-deductible IRAs from prior years, including rollover iras? If so, the IRS rules are you assume you are proportionately prorating your roth converstion between your deductible and non deductible, which would cause some taxable income. As an example: If you had $10,000 traditional/deductible or rollover IRAs from prior years, and a $5000 non deductible that you converted to Roth - tax law dictates that you assume 10k/15k of your conversion was from your deductible IRA and 5k/15k was from non deductible, so you would have $10k/15k times $5k = $3667 of taxable income in that example.
As a general rule it is best not to convert traditional non deductibles to Roth if you have other traditional deductible iras, because it will create a tax liability you may not have planned for.
In this case, I do not have another IRA. This is the only IRA that I have.
Could the program be taxing taxable earnings. Make sure you enter all the information correctly that Turbo Tax asks for and make sure the 8606 was completely correct prior to the 2019 tax year.