Backdoor Roth clarification

[afromca]

Hello,

I contributed to traditional IRA and converted it to Roth IRA as part of doing a backdoor. I did this in April of 2024, for 2023, and then later in 2024, for 2024. Schwab sent me a consolidated 1099-R for the aggregate amount in March 2025. There is also some cents of gain in it. How am I supposed to file this in my downloaded TT premier? I tried it but it always increases my taxes. Any guidance is hugely appreciated!

[AnnetteB6]

If everything is reported properly in your return, the only amount taxable will be the cents of earning that were converted from the Traditional IRA to the Roth IRA.

For you, there are three main steps that are to be completed.  First, the non-deductible Traditional IRA contribution hat was made in 2024 for the 2023 tax year should have been reported as part of your 2023 tax return.  If it was not, there are steps you need to take to remedy this.  These steps are covered in the TurboTax help article below under the section If you conversion contains contributions made in 2024 for 2023.

Next, report the non-deductible Traditional IRA contribution made in 2024 for 2024 on your 2024 tax return.

Then, report the Form 1099-R distribution from the Traditional IRA that was converted to the Roth IRA.  As long as you do not have any other Traditional IRA accounts, then the only taxable amount will be the small amount of earnings over and above the non-deductible contributions.

Take a look at the following TurboTax help article for specific steps to take care of this in your return:

How do I enter a backdoor Roth IRA conversion?
 

[afromca]

Thanks, that article confused me because it said:

• If you received this form in 2024, complete both steps below to report it on your 2024 taxes.
• If you'll receive this form in 2025, wait to report it on your 2025 taxes. In this case, only complete Step 1 below for your 2024 taxes. You’ll complete both steps next year when filing your taxes for 2025.

I received the form in March 2025. So I have to report this next year? or is the language just incorrect and needs to be explicitly corrected. 

Thanks!

[afromca]

Also, when I follow the instructions in the article, it does not matter if I enter the total for 2023 and 2024 in "Amount converted to a Roth IRA account", or just 2024. Why is that? I have followed all the preceding steps including the 2023 section at the bottom of the article.

Same thing for my spouse (although we converted from an older traditional IRA to the roth IRA, including 2024 contribution, so I am not sure where/how we will pay taxes for the older traditional IRA in TurboTax).

Thanks!

[AnnetteB6]

If you actually requested that the Traditional IRA be converted to a Roth IRA during the calendar year of 2024 and you received a Form 1099-R that has 2024 at the top, then it should be reported on your 2024 tax return.

If the conversion took place in the calendar year of 2025, then you should received a 2025 Form 1099-R to be reported on your 2025 tax return.

If your spouse's Form 1099-R included a distribution from a Traditional IRA which had a combination of pre-tax and after-tax contributions in the account, then the conversion will not be completely non-taxable.  The follow-up questions after entering the Form 1099-R distribution should ask you about your basis in the account (non-deductible or after-tax contributions) and also the total value of all Traditional IRAs.  These values will be used to determine the amount of the conversion that is taxable on your return.

@afromca 

[afromca]

Thanks, my spouse had deductible traditional IRA contributions from 2012 and 2014. So I should be entering the basis of that or the entire value, as it got converted to Roth during 2024 also.

Also, I still have this question: Also, when I follow the instructions in the article, it does not matter if I enter the total for 2023 and 2024 in "Amount converted to a Roth IRA account", or just 2024. Why is that? I have followed all the preceding steps.

Btw I do see I did everything correct in 2024 for the 2023 contribution. So it is carrying over the basis into my filing from TurboTax. I assume it's doing the right thing automatically 

Thanks ! @AnnetteB6 

[AnnetteB6]

Since there was some basis from 2012 and 2014 in your spouse's Traditional IRA, that amount does need to be entered as well as the total value of all Traditional IRA accounts.  Including that prior basis will reduce the taxable amount of your spouse's Traditional to Roth conversion.

For your question about there not being any difference when you enter 2023 and 2024, or just 2024 -- if you are referring to the follow-up question after you have entered your Form 1099-R which includes your 2023 and 2024 contributions, plus the small amount of earnings, then this is what is happening.  When you take a distribution from a Traditional IRA that is 100% non-deductible contributions plus some earnings, then no matter what amount is distributed only the earnings will be taxable.  The non-earnings amount being distributed has already been taxed (before you put it in the Traditional IRA) whether you convert it to a Roth IRA or just keep the money.  

@afromca 

[afromca]

Thanks for your guidance so far. I think my backdoor IRA entries are fine and making sense. For my spouse, it seems to be a bit more complex. We converted all her traditional IRA (from 2012-14) to Roth IRA as step 1 in 2024. Then as step 2 we did a backdoor Roth for her before EOY 2024 (but we had moved all her 2012-14 to Roth few days before already). Should we not be paying tax only on the 2012-14 transfer at our current tax rate? I am not sure if that is allowed, or how else could we pay the proper taxes? (does her situation trigger pro rata?)

Thanks! @Ann