Possible Backdoor Roth IRA Overcontribution

[thegoodreturn]

I opened up a traditional IRA this month (December 2025) and contributed $7,000 to it. My goal was to minimize any gain between the time I funded the account and the Roth conversion.

When I converted it to Roth, it took a few days for the money to settle, and another few days for the conversion to happen.

There were close to $5 in gains when all was said and done. The completed conversion moved $7005 into my Roth IRA.

Did I overcontribute and do I have to pay the penalty? Is the contribution amount based on the amount I funded the traditional IRA initially, or is it based on the conversion amount? How do I report this in the 2025 Turbo Tax Premiere Windows desktop edition?

[dmertz · Accepted solution]

"Did I overcontribute and do I have to pay the penalty?"

Assuming that you were eligible to contribute $7,000 to the traditional IRA, no, you have not made an excess contribution.  The amount that you converted to Roth has nothing to do with whether or not you have made an excess contribution.  There is no limit on the amount that you are eligible to convert to Roth from a traditional IRA.  Assuming that you have no other funds in traditional IRAs, $7,000 of the conversion will be nontaxable and the $5 gain will simply be taxable as ordinary income, calculated on Parts I and II of your 2025 Form 8606.

[baldietax]

If you're worried about the $5 that's just earnings in the IRA which is sometimes unavoidable, you'll pay a little tax on the $5 part of the conversion.

As long as the $7000 was a valid non-deductible contribution then you should be fine.  A common reason for it to not be valid is it you don't have any "earned" income like a W2, say in retirement, you cannot contribute more to any Trad or Roth IRA than you have earned income.

When you do your taxes you'll input this in 2 parts; the non-deductible IRA contribution in the Retirements section under Deductions, and you'll get a 1099-R for the conversion which you'll input under the Retirements section under Income.  When you do the 1099-R input there will be some questions about what you did with the money which you need to answer carefully, see help page below.  The contribution and tax on the conversion will be calculated on Form 8606.

You'll eventually get a 5498 showing the contribution but those usually don't go out until May as IRA contributions for prior tax year can happen up until April 15th, but you don't need that form to file.

see the following

https://ttlc.intuit.com/turbotax-support/en-us/help-article/retirement-benefits/enter-backdoor-roth-...

[thegoodreturn]

Thanks!