How to enter a Traditional IRA to a Roth IRA conversion when I thought I was doing a back door conversion at the same time

[mhuber1234]

Hi my wife had a traditional IRA, balance was 11,064, then, we were told about back door ira to roth ira.  We put in 7,000 to the traditional IRA in November, so full balance of 18,064, then converted this full balance to a Roth.  I entered into Turbotax, and I am getting the Taxable amount as 11,064 which makes sense that it should be taxable.  Another post mentioned that I should also be paying 61% of the 7,000, since it was mixed with the base 11,064.  7000/18064 or 38% untaxable of the 7000, and 61% taxable of the 7,000.  Now it appears that we do come over the adjusted income limits for Traditional IRA so that was why the planned back door.  So question is should my Turbotax entry be charging more than the original traditional balance of 11064 and showing part of the 7,000 as taxable since they were mixed in the 2020 year?  If so, what could I have entered incorrectly to not catch the 7000 as taxable.  Thank you

[DanaB27]

It sounds like you converted the whole traditional IRA balance after you made the 2020 nondeductible contribution of $7,000. Then no, only the $11,064 will be included in the taxable income (assuming there were not any earnings on the $7,000 yet). The allocation calculation only comes into play if there is a balance left in the traditional IRA.

It seems as if you did a great job and entered everything correctly but here are the instructions again if you like to review them:

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
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” if you had a nondeductible contributions before this tax year.
9. If you had a basis in the Traditional IRA before then enter the amount.
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

To enter the 1099-R distribution/conversion: 

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Click "Continue" and enter the information from your 1099-R
5. 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”
6. On the "Your 1099-R Entries" screen click "continue"
7. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
8. Answer the questions about the basis

[mhuber1234]

Thank you