Back Door Roth: Desktop TurboTax 2023 Indicates I owe Taxes on After Tax Traditional IRA even though Converted to Roth Same Day

[DanaB27]

Thank you, I reviewed your return. Right now, your 2023 Form 8606 only shows a contribution for 2023 that was made in 2024 and no basis from prior years on line 2. 

But you mentioned in your previous post that you made a contribution for 2022 in 2023 and I assume you converted them in 2023. Therefore, your 2023 Form 8606 should have the basis on line 2 from your 2022 Form 8606 line 14.

 If you made a $6,000 nondeductible traditional IRA contribution for 2022 then your basis from line 14 of your 2022 Form 8606 should be $6,000 and this will have to be entered in the interview after you entered all your Form 1099-Rs.

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. On the "Review your 1099-R info" screen click "Continue"
5. Answer "Yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
6. Answer the questions about the basis from line 14 of your 2022 Form 8606 (should be $6,000) and the value of all traditional, SEP, and SIMPLE IRAs

If Form 8606 isn't included in your 2022 return, you'll need to fill out a 2022 Form 8606 to record your nondeductible basis and mail this form to your designated IRS office.

Technically you can be fined $50 for failing to file the form on time, but the penalty can be waived if you have reasonable cause. Please see Relief for Reasonable Cause for additional information.

@qwert_buddy 

[qwert_buddy]

@DanaB27 

Thank you for your assistance!

In 2023, we jointly filed our 2022 tax return. We contributed the maximum limit of $12,000 to a traditional IRA, which we promptly converted to a backdoor Roth IRA.

You mentioned that according to our previous conversation, my 2022 Form 8606 should show a basis of $6,000, corresponding to a nondeductible traditional IRA contribution. However, I discovered that only my 2022 tax return includes Form 8606, with line 1 left blank, while my spouse doesn't have a Form 8606 at all.

The reason I have a Form 8606 for 2022 is because of a partial backdoor Roth conducted in 2021.

To rectify this, I believe we need to amend our 2022 tax return by updating my Form 8606 to reflect a $6,000 basis for me and filing a new Form 8606 for my spouse also showing a $6,000 basis.

You mentioned that if Form 8606 wasn't included in our 2022 return, we should fill out a 2022 Form 8606 to record the nondeductible basis and mail it to the designated IRS office. I believe we can claim reasonable cause as Accuracy-Related Penalties in good faith to avoid fines.

1. Regarding TurboTax, can I file a corrected 8606 form for our 2022 tax return online now?

2. Can I also input the basis as $6,000 for my 2023 tax return (and $6,000 for my spouse), even though our 2022 tax return shows it as $0(for my 8606) and no 8606 for my spouse due to the mistake?

3. Can TurboTax assist with this process? I have filed all my taxes with Turbo tax for 2022 tax return.

Update: I went to 2022 taxes amend return in Turbo Tax online and found that:

My spouse did not get any 1099-R for 2022 year. Probably because the 2022 IRA contributions were made in 2023.

I got two 1099-R forms that have been correctly entered in my 2022 tax returns. I correctly entered my basis from my 2021 tax return line 14 for my 2022 tax returns. Turbo tax does not even ask me about my spouse's basis (probably because there is no 1099-R form. There is a 5498 form that shows 6K towards traditional IRA).

So why is my 2022's tax return's form 8606 showing  line 14 basis and line 1 as blank for me, and no 8606 for my spouse?

Token number for our 2022(filed jointly) tax return is: 1215648

Token for my 2021 tax return is : 1215656

[qwert_buddy]

@DanaB27 

Sorry for tagging you again, getting a bit concerned that I only have 7 days more to fix this issue.

[DanaB27]

Thank you. I reviewed your 2022 tax return, and you did not enter the nondeductible traditional IRA contribution for 2022. 

You can amend your 2022 tax return to create the correct 2022 Form 8606. Enter your nondeductible traditional IRA contribution for 2022 in the IRA contribution section.

Yes, you enter the basis as $6,000 for you and $6,000 for your spouse on your 2023 tax return. TurboTax will ask for an explanation, and you can state that you are correcting the 2022 Form 8606 for the missing nondeductible traditional IRA contribution for 2022.

@qwert_buddy 

[qwert_buddy]

Thank you so so much! You have saved me from so much confusion.

I was able to file 2023 tax returns and also amended the 2022 8606 form online via Turbo Tax.

[AltanSky]

I am having this same issue. I have been using TurboTax desktop for years and when we first started doing a backdoor Roth conversion, it was fully supported. This year, our after tax contributions and subsequent Roth IRA rollovers are appearing in our AGI. I did receive a 1099-R for the roll-over and am afraid if I "fudge" the numbers in turbotax so the tax is correct, that will trigger an audit.  Need a fix in the next 4 days!

[DanaB27]

To confirm, you made a nondeductible traditional IRA contribution for 2023 and converted them in 2023? This shows as taxable on line 4b of Form 1040?

Please review the instructions here: How do I enter a backdoor Roth IRA conversion?

Did you have any pre-tax funds funds in your traditional/SEP/SIMPLE IRAs and the value on December 31, 2023 was not $0? If yes, the pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part. 

@AltanSky 

[dangant]

@DanaB27 - Wow you are a lifesaver!!! The link to backdoor roth was helpful and resolved my issue. I do think there is a bug but only if you are editing fields and re-editing fields in an unintuitive order. I believe a screen asked for my trad IRA 2022 basis as of 12/31/2022, but my first non deductible trad IRA contribution was in 2023 (still tax season 2022), however, I needed this field filled out since it was line 14 from 8606 and my 2022 taxes had that field filled out.

I had a similar scenario as the others - contributed a non deductible amount to my trad in tax season 2022 (4/10/2023), contributed another non deductible amount to my trad in tax season 2023 (5/5/2023), and then converted my trad to roth in tax season 2023 (6/22/2023). I was exploring the different options and going back and reentering fields. No matter what I did I could not get the taxable portion of my IRAs to reflect that I made non deductible contributions. I removed all my 1099-Rs and readded them. I followed and refollowed the backdoor roth instructions, nothing worked

It wasn't until I chose 'clear & start over' and followed the backdoor roth screens in order that the issue resolved.