How to handle back door Roth IRA conversion in TurboTax 2021

[Allison109]

I made non deductible traditional ira $6000 in Jan 2021 for 2020 traditional ira contribution. And made another non deductible $6000 contribution in May 2021 for traditional ira 2021 contribution. As market fluctuate, the  traditional ira account balance was $11000 in late May 2021 when I converted all $11000 to Roth IRA. How to report this convention in 8606? Thanks in advance for your suggestions! 

[DanaB27 · Accepted solution]

On your 2020 tax return, you will enter the nondeductible contribution for 2020 (if you need to amend to correct this please see How do I amend my 2020 return?) :

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 (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible).

On your 2021 tax return

To enter the nondeductible contributions:

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” since 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 (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get 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 and value

[Allison109]

Thank you very much! Just found out, the capital loss of $1000 goes to “total basis” of 2021 and early years which is for next year 8606. 

[harriedbutcool]

I tried the steps mentioned in the CD/Download portion of the response, but I cannot get to a screen that contains Choose Not to Deduct IRA Contributions.  I cannot get to that screen.  Please advise.  It looks like it would be on the online version, but I don't have that version to check it.  Thank you.

[DanaB27]

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. This won't affect your entry in regards to the backdoor Roth since you want to have the contribution nondeductible.

You can check Form 8606 to verify that you nondeductible contribution is entered as basis on line 1.

@harriedbutcool

[BoooTaxes]

I'm also using the Downloaded version (premier).  It keeps telling me I made a Excess contribution b/c I did a back door conversion and wants to charge me a penalty.   But it isn't t taxing the distribution.   The original IRA was non deductible & Turbo tax has the correct cost basis,  It appears I'm have the same issue as a poster above.  Someone please help.  I know we can do this w/ no issues.  Why doesn't the software recognize this? 
"

I talked to the "help desk" at Turbo tax & they told me I needed to upgrade to Premier, that didn't do any good.

[DanaB27]

Please make sure you didn't select that you recharacterized your traditional IRA contribution to Roth IRA during the IRA interview.

Also, make sure that you did have enough taxable compensation to make the contribution and didn't contribute more than $6,000 ($7,000 if you're age 50 or older).

Please review the instructions for backdoor Roth.

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 contribution 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 (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 that your income is too high to deduct the traditional IRA contribution and then a screen saying $0 is deductible).

To enter the 1099-R 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 "Review your 1099-R info" 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 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

@BoooTaxes