Mega Backdoor Roth IRA conversion isn't working

[callussun]

I did a Mega Backdoor Roth IRA conversion last year by contributing my after tax money to my traditional IRA account then did a Roth IRA conversion immediately. And I got the 1099-R form for the distribution from my traditional IRA account and 5498 form for the Roth conversion from my Roth IRA account, showing the same amount of money converted to Roth IRA.

The 1099-R form specifies the entire amount as taxable amount (box 2a) with "Taxable amount not determined" box 2b checked.  The box in 7 with "The IRA/SEP/SIMPLE" box is checked on my copy of the 1099-R" is checked as well.

After importing the 1099-R, however, Turbotax increased the amount of Federal taxes owed by this contribution. In the next question: "What Did You Do With The Money ... ?", I chose "...moved the money to another retirement account ...".

Then it gave me 2 options: 1. Rolled over all of this money. 2. Did a combination of rolling over, converting, or cashing out the money.

If I choose option #1 above, it removes the increased Federal tax for this contribution. However, the description for "roll over" clearly states that Roth IRA conversion isn't a roll over.

If I choose option #2 above, it asks me to fill out 2 boxes, one for amount rolled over to another account, the other for the amount converted to a Roth IRA account. Even if I put the entire amount of contribution to that box, it still doesn't change the tax owed.

I have verified all the information by getting support from a TurboTax product expert over the phone with screen sharing. Everything looks right on my part. I did the exact same thing last year and didn't have an issue. Is there something wrong with TurboTax Premier version on Windows this year? Note I have updated the software last Sunday before I did the taxes.

The TurboTax product expert advised me to make a post here to get help.

Thanks!

[AnnetteB6]

The missing piece is to enter the non-deductible Traditional IRA contribution that you made.  After this is entered, the basis of the Traditional IRA will be taken into account and the conversion to the Roth IRA will be non-taxable.

Take a look at the following TurboTax article for step-by-step instructions.  Follow the steps shown under Step 1:  Enter the Non-Deductible Contribution to a Traditional IRA:

How do I enter a backdoor Roth IRA conversion?

[callussun]

Thanks that helps!

Another issue I'm facing: I contributed $12,000 in 2021 before April, $6000 for 2020 and $6000 for 2021. But Turbotax only asks about how much I contributed to 2021, then telling me that I over contributed $6000. How do I deal with this?

Thanks

[DanaB27]

You will need to enter the $6,000 contribution for 2020 on your 2020 tax return. TurboTax will create Form 8606 with a $6,000 basis on line 14. You will enter this basis on your 2021 tax return when TurboTax asks about the prior basis / prior nondeductible contributions (steps 8 and 9). Please see How do I amend my 2020 return?

On your 2021 tax return 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 for 2021 $6,000
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 $6,000 basis in the Traditional IRA from your 2020 Form 8606 line 14.
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).

@callussun