I am double taxed with my after tax contribution to traditional IRA after i converted to Roth IRA.

[BUND]

Hi experts,

I was over my MAGI for my roth IRA contribution for 2023 so I made an after tax contribution to my Traditional IRA for 6500. I forgot to convert it the same day so a few days later I did a conversion to Roth IRA and the money grew to 6510. My limit of contribution for traditional IRA is 6500.

I was entering my 1099R in turbo tax and realized the form said the taxable amount is 6510. with taxable amount not determined box checked and total distribution box checked. Distribution code is 2 - early distribution.

The program then asked whether I have any non-deductible contributions to my IRA. I put down yes because i received a 8606 form for year 2022. I used turbo tax before and I also did a conversion in the year 2022. So it prefilled 1000 for me.

Am I supposed to enter the 6510 together with my 1000? I tried to just go with 1000 and i ended up getting taxed on my whole 6510. Please help!

Thanks in advance!

@DanaB27 

[AnnetteB6]

Be sure to enter your 2023 non-deductible Traditional IRA contribution of $6500 to your return.  That will increase the basis in the Traditional IRA and make the conversion non-taxable.

Take a look at the following TurboTax help article for step-by-step instructions in case you need it:

How do I enter a backdoor Roth IRA conversion?
 

[BUND]

Hi Annette,

would you be able to walk me through on how to enter the non-deductible contribution?

It said it doesn’t match and asks me for a reason. Likely because I already about 1000 total basis from previous year. 

 
I entered 7500 and it it is requesting an explanation. What should I put down for the 1000 and the 6500?

thanks.

@AnnetteB6 

[DaveF1006]

To clarify, did you do a Back-Door Roth?

@BUND 

[BUND]

Yes. I made a 6500 after tax contribution to my traditional IRA and converted it to my Roth IRA in a few days which I gained 10 bucks in those few days. 

@DaveF1006 

[BUND]

should I put down 7500 as non deductible? What should I put down as explanations? Should I split it up to 1000 and 6500? So that 10 I earned in traditional Ira will be taxed? 

thanks in advance again

@AnnetteB6 

@DaveF1006 

[DanaB27]

You will enter the nondeductible traditional IRA contribution of $6,500 for 2023 and the previous year basis of $1,000 with these steps:

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 of $6,500
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 your basis in the Traditional IRA from your 2022 Form 8606 line 14 (you stated this was $1,000)
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).

@BUND 

[BUND]

Thanks Dana.

I got stuck at the retirement section after I did what you said.

it asks again whether I contributed to traditional IRA. And then asks me whether I switched my money, or “recharacterized” to Roth IRA. I thought I converted to Roth IRA instead of recharacterized. So should I just enter 0 over there? Or I should put down 6510 because that’s the amount I moved to Roth IRA.

my apologies for the confusion. 

@DanaB27 

@AnnetteB6 

@DaveF1006 

[DanaB27]

Yes, you converted the money, you did not recharacterize it. Therefore, you will enter nothing  when TurboTax asks if you switched your money, or “recharacterized” it to Roth IRA.

The conversion will be entered when you enter your Form 1099-R for the conversion in TurboTax Desktop:

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 2022 Form 8606 ($1,000) and the value of all traditional, SEP, and SIMPLE IRAs