Backdoor Roth IRA contributions for 2020 and 2021 performed in early 2021

[CCG_me]

In January of 2021, I performed an after-tax contribution of $12000 to a traditional IRA for both 2020 and 2021 (total of $12000) prior to filing my taxes for 2020 and promptly rolled it over into a Roth IRA. I did not file form 8606 for 2020 as I did not have a 1099-R at that time. The 1099-R shows a $12000 distribution and taxable amount. I followed the directions for reporting a standard non-deductible contribution, but I’m still being taxed for the $6000 2020 contribution. What do I need to do to properly report this on my 2021 return through TurboTax and what do I need to do to correct my 2020 return (if anything)?  Is this just submitting an additional 8606 for 2020?

[FangxiaL · Accepted solution]

Follow this two-step process to properly enter your backdoor Roth conversion:

Step 1: Enter the Non-deductible contribution to a Traditional IRA:

1. Open your return if it's not already open
2. Inside TurboTax, search for ira contributions and select the Jump to link in the search results
3. Select Traditional IRA on the Traditional IRA and Roth IRA screen and Continue
4. Answer No to Is this a Repayment of a Retirement Distribution?
5. On the Tell Us How Much You Contributed screen, enter the amount contributed and continue
   • Enter $6,000 for Your total 2021 traditional IRA contributions
6. Answer No on the Did You Change Your Mind? screen
7. Answer No on Any Excess IRA Contributions Before 2021?
8. Answer Yes, I made and tracked nondeductible contributions to my IRA, or No, I did not make and track nondeductible contributions to my IRA. If you don't have any other Traditional IRA accounts, you can answer Yes
9. Enter $6,000 for Total Basis as of December 31, 2020 on next screen
10. Answer the questions on the following screens, until you reach Choose Not to Deduct IRA Contributions. Select Yes, make part of my IRA contribution nondeductible and enter $6,000 in the box. 

Step 2: Enter the Conversion from a Traditional IRA to a Roth IRA

 Inside TurboTax, search for 1099-r and select the Jump to link in the search results

1. Answer Yes to Did you get a 1099-R in 2021?, then Continue
   • If you land on Your 1099-R Entries screen, select Add Another 1099-R
2. Select how you want to enter your 1099-R (import or type it in yourself) and follow the instructions
3. Answer None of these apply when you reach the screen Do any of these situations apply to you?
4. Select I converted some or all of it to a Roth IRA on the Tell us if you moved the money through a rollover or conversion screen
5. Next, choose Yes, all of this money was converted to a Roth IRA
6. Continue answering questions until you come to the Your 1099-R Entries screen

To check the results of your backdoor Roth IRA conversion, see your Form 1040:

1. On the left side of your screen, select Tax Tools, then Tools
2. Under Tool Center, select View Tax Summary
3. On the left side of your screen, select Preview my 1040
   • Your backdoor Roth IRA amount should be listed on Form 1040, Line 4a  as IRA distributions
   • Taxable amount should be zero unless you had earnings between the time you contributed to your Traditional IRA and the time your converted it to Roth IRA, then the earnings would be taxable
   • Schedule 1, Line 20 IRA deduction, should be blank
4. Select Back on the left side of your screen to return to where you left off in TurboTax

[CCG_me]

Thank you so much. This has been a great help!

[veee]

Can you upload how 8606 should look and if there are other forms to be fill out? Thanks

[veee]

Can you upload how 8606 should look and if there are other forms to be filled out? Thanks

[FangxiaL]

Here is Form 8606 after entering 2021 contribution:

@veee

[Lyra23]

When I add the basis of $6000 for Dec 31, 2020, I am prompted to provide an explanation for why that differs from the $0 basis I reported in my 2020 return.  Did I do something wrong?  

[Jenny011]

I am in the same situation and my 1099 reports 12000. Should I update this to 6000 manually? When I import this it automatically imports the entire amount. 

I am sure I am doing it wrong now, but when I leave the 12000 and enter within the deduction. TurboTax says I have overfunded in 2021 even though $6000 was for 2020 and $6000 for 2021. It all comes out as non taxable but it says I will have a penalty? The amount of refund remains unchanged though. Please help!! 

[hONeywoOd]

For me, after following up to step 9

8. Answer Yes, I made and tracked nondeductible contributions to my IRA, or No, I did not make and track nondeductible contributions to my IRA. If you don't have any other Traditional IRA accounts, you can answer Yes

9. Enter $6,000 for Total Basis as of December 31, 2020 on next screen

It went straight to 'Income Too High To Deduct an IRA Contribution' instead of step 10. I think step 10 is very important. What shall I do? Thank you!