Back Door Roth Conversion amount comes as fully taxable

[phyuup]

I have contributed to a regular  IRA in October 2021 and after two weeks converted to a Roth IRA. I am using Turbo Home and Business version.  When I go through the process  it comes back saying the 7000 is taxable ( since my income is above the limit and I have a retirement plan.)  

Also, I can follow the previous answer set of guidelines up to number 8:  [Select I did a combination of rolling over, converting or cashing out the money. Then, enter the full amount in the box next to Amount converted to a Roth IRA account and ] 

But I do not get the part: What did you do with the money exactly as it is with john doe .... but I can assign the full amount converted to Roth IRA.       then it comes as fully taxable.

( I do not have any traditional IRA, but have I have a Roth IRA and a Rollover and SEP IRAs.  ) Questions regarding the previous year's conversions etc ask for 2020 and before for which I have no conversions. One time it came up with $189 out of $7000 as non-taxable.  I think that is when I included the SEP and ROLLOVER IRAS  as the regular IRA basis (other than Roth).    Any help is appreciated. 

thanks 

Confused new member 

[DanaB27]

It seems as if the pro-rata rule applies to you since you will have to enter the total value on December 31, 2021, of all your traditional/SEP/SIMPLE IRAs. If they have pre-tax funds then each conversion/distribution from the traditional IRA will have a taxable and nontaxable part. The rest of your basis will be listed on line 14 of Form 8606 and can be used for future distributions/ conversions.

Please review the steps below.

To enter the nondeductible contribution to the traditional IRA for 2021:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
10. If you had a basis in the Traditional IRA before then enter the amount.
11. 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).

To enter the 1099-R distribution/conversion: 

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?"
12. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[hzhou]

I have the same issue on home & biz version.

DanaB27, did you try your solution on home & biz version?

My friend's premier version working fine.

[DanaB27]

Yes, I used TurboTax Home & Business version. It worked fine.

Can you provide more details? When did you make your contribution? When was the conversion?

Did you have a balance in your traditional/SEP/SIMPLE IRAs on December 31, 2021? Backdoor Roth only works if your traditional/SEP/SIMPLE IRAs are empty.

@hzhou

[hzhou]

My case is that on my traditional IRA, all contributions for last several years are non-deductible. I did all ROTH conversion on 2021. 

On step 1, I put 2021 contribution and the base from all previous years.

On step 2, I modify 2a (1099-R) to the taxable amount. All others are as you suggested.

The result is that the whole distribution is taxed.

But if I uncheck IRA/SEP/SIMPLE box, the result seems reasonable, but it is not correct based on your step.

Could you do online support? I can show you my case.

By the way, my friend has premier version, we do the same way, but his result seems good.

[DanaB27]

You shouldn't change you Form 1099-R since it will not match with what was reported to the IRS.

You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Download: 

1. On your menu bar at the very top, click "Online"
2. Select "Send Tax File to Agent"  
3. Click "Send"
4. The pop-up will have a token number
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@hzhou

[njtaxcom]

so i put $6000 in IRA at January/2021 for year 2020, convert it to Roth IRA days later.
then i put another $6000 in IRA at March/2021 for year 2021, convert it to Roth IRA days later.
according to your instruction, since the first $6000 was not in 2020 return, i need to fill out a 2020 Form 8606 and mail out.
Then how to input for this year? right now the 1099R i get says: Gross distribution $12000, Taxable amount $12000, Taxable amount not determind(Yes), Total distribution(Yes).
For tax year 2021, the end result should be, (4a)IRA distributions $12000, (4b)Taxable amount $0?
I am using Premier version

[DanaB27]

Yes, if you didn't have any earnings and your traditional, SEP, SIMPLE IRAs were empty after the conversion then line 4b of Form 1040 should be $0.

Yes, you will have to report your 2020 nondeductible contribution on the 2020 Form 8606. Please see How do I amend my 2020 return? You will have the $6,000 basis on line 14 and will enter it during the interview when you work on your 2021 tax return (steps 8 and 9 when you enter your IRA contribution or steps 6 and 7 when you enter your conversion).

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 $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” if 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 (if you had a basis in the prior year)
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).

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

@njtaxcom

[madmanc20]

NVM

[DaveF1006]

To clarify, is there a question you wish to have answered?

@madmanc20