How do I enter a backdoor Roth IRA conversion?

[youngkuurus]

What did you do differently than the instructions? I am still showing 1040 4a and 4b as $0 whereas my 4a should be $14,000 and 4b $0 using a backdoor Roth IRA conversion.

Turbotax doesn't seem to be interested in fixing the software problem they have so I will soon have to look into another company that allows for a backdoor Roth IRA conversion in 2021. I signed up for the "Premier Live" and that accomplished absolutely nothing!

[gracemr2]

I am having the exact same issue.  Despite it working last year, no matter what I do, the backdoor conversion is still showing up as taxable income.  

Sure would love for Turbotax to let us know how to fix this before the prices go up.  

[youngkuurus]

I just got off with the TurboTax Premier Live help and they stated that TurboTax software will be corrected to properly fill out 2021 backdoor Roth IRA conversions on 3/31/22.

[homemaker2456]

what did you do to get this resolved? I'm still unable to resolve this. Step 1 - 7  isn't an option that shows up. 

[MarilynG1]

Doing a backdoor Roth conversion is a two-step process.

Step 1:  Enter the Non-Deductible Contribution to a Traditional IRA.

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

Click this link for instructions on How to Enter a Back-Door Roth Conversion. 

[youngkuurus]

You aren't following the topic. The instructions you are quoting are not working in the 2021 software. TurboTax support said the software would not be corrected until 3/31/22.

[DanaB27]

I tried to recreate the issue in TurboTax Premier Online but wasn’t able to recreate it. It would be helpful to have a TurboTax ".tax2021" file that is experiencing this issue. 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: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. 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.

@youngkuurus

[djgirl18]

So if we did a backdoor Roth IRA, we can not submit our taxes until after 3/31/22 when the 2021 Turbo Tax software is supposedly updated/fixed for taxing our contribution (per another customer's post)? Thank you.

[DanaB27]

I could not recreate the issue so please try following these steps below for backdoor Roth and then verify if lines 4a and 4b on Form 1040 show it correctly.

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
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 contributions before this tax year.
9. If you had a basis in the Traditional IRA before then enter the amount.
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 screen saying $0 is deductible).

To enter the 1099-R distribution/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 "Your 1099-R Entries" 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 and value

To preview Form 1040:

1. Click on "Tax Tools" in the left menu
2. Click "Tools"
3. Click "View Tax Summary" in the Tool Center window
4. Click on "Preview my 1040" on the left

The taxable amount in line 4b on Form 1040 should be $0 unless you had earnings or you had previous deductible funds left in the traditional IRA and Schedule 1, line 20 should be blank.

@djgirl18

[youngkuurus]

My token number is ks-934615.

Let me know if you need anything else.

[youngkuurus]

Yes that is what I was told. However, I would still try to see if it accepts your backdoor Roth IRA conversion using the documented steps. Step 1.7 is the discrepancy that I have had with the software that does not follow the instructions.. It should show the amount of your non-deductible IRA contributions on your 1040 in line 4a and your taxable portion of taxable income in 4b. If your contribution made any money prior to the conversion 4b may list a small number of the profit.

The published steps for a backdoor Roth IRA worked for me in tax years 2018, 2019 and 2020 using TurboTax.

[youngkuurus]

The error in the software is in your step 10:

On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” 

It never asks this question.

It defaults to this statement:

<name> modified adjusted gross income (MAGI) is $xxx,xxx which puts <name> over the limit for IRA deductions. To deduct a contribution, you can't have a MAGI over $125,000 while being covered by a retirement plan at work.

I have talked with TurboTax on the phone and they have took screen shots of my screen and said they would send the information on to someone to resolve the issue. However I never received the promised email with my Case number. The first time I called they said they couldn't help me and sent me a case number set to "resolved".

[Rajeeva Raju]

I 100% AGRRE WITH YOU SAME IS MY DILEMMA, THE TT SOFTWARE IS NOT FUNCTIONING THE WAY IT SOULD. SO SORRY, DESOITE REPEATED COMPLAINETS THEY ARE UNABLE TO FIX THIS BUG. i WILL WAIT COUPLE OF MORE DAYS IF NOT FIXED, I WILL TO FIND ALTERNATIVE WAYTO FILE TAX THIS YEAR.

IT IS TERRIBLE !!! :(

"Income Too High To Deduct an IRA Contribution"      ---------     THIS IS NOT RIGHT

IS TUBO TAX TAKING A NOTE ????????

I get all of the prompts that you state except when I enter my non-deductible IRA it doesn't ask "Do you want to make your IRA contributions nondeductible?". I get "Income Too High To Deduct an IRA Contribution" which is the same thing but it doesn't seem to filling out the 1040 line 4a with my non-deductible IRA contributions as it has in past years. Because of this, TurboTax is making me pay income taxes on my non-deductible IRA contribution that I converted to a Roth IRA. This is unacceptable.

I called in and got a case number [phone number removed] which was set to "resolved" but nothing was resolved. It looks like there is a software bug this year with TurboTax Premier. The agent said I filled everything out correctly but couldn't figure out why TurboTax wasn't filling out the 1040 line 4a correctly.

If I can't get this resolved soon then I will have to use another companies tax software.

[trbelair]

I did 2 Back Door Roth IRAs and here's how they worked.

Me:  I have a Traditional IRA with $0.03 in it.  I deposited $7,000 (I'm over 50) and immediately converted it to my Roth IRA.  I followed the instructions and it worked fine.  All transactions occurred in 2021

Spouse:  I set up a Traditional IRA in 2022, deposited $7000 (again over 50) and immediately converted it to her ROTH IRA.  When I enter this info into Turbo Tax (the Deductions & Credits section), I enter the $7,000 that was entered between Jan 1, 2022 and Apr 18, 2022.  These transactions are for 2021 tax year.  Unfortunately, when it enters this onto the 8606 form, it somehow is doing it wrong and has the $7,000 as a Taxable Amount on line18.

Wondering of this is one of the fixes that will take place on 3/31/2022?  Also, this seems pretty late to be applying a fix :(

[DanaB27 · Accepted solution]

RajeevaRaju please be aware, the "Income Too High To Deduct an IRA Contribution" message is not an error message. As mentioned in my instructions step 10: "If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible". This screen will be after the warning that your contribution isn't deductible because of your MAGI.

Please be aware, line 4a is showing your total IRA distributions, not your nondeductible IRA contributions. If you had IRA distributions then please verify that the IRA/ SEP/ SIMPLE box is checked on your Form 1099-R entry.

1. Click on "Search" on the top right and type “1099-R”
2. Click on “Jump to 1099-R”

@Rajeeva Raju

trbelair, did your spouse convert a traditional to Roth IRA in 2021? The $7,000 contributed in 2022 for 2021 will be converted in 2022 and the conversion has to be entered on your 2022 tax return. For your spouse, you will only enter the nondeductible traditional IRA contribution for 2021 on your 2021 tax return, unless you had some other amount converted.

@trbelair

youngkuurus, I reviewed the information, thank you. 

It seems as if you only had distributions from pension plans when I looked at your Form 1099-R entries. None of the Forms had the  IRA/ SEP/ SIMPLE box checked. If you had distributions/ conversions from a traditional IRA then please make sure the  IRA/ SEP/ SIMPLE box is checked. Then these amounts will be listed in line 4 Form 1040.

1. Click on "Search" on the top right and type “1099-R”
2. Click on “Jump to 1099-R”

Please be aware, the statement "<name> modified adjusted gross income (MAGI) is $xxx,xxx which puts <name> over the limit for IRA deductions. To deduct a contribution, you can't have a MAGI over $125,000 while being covered by a retirement plan at work" is not an error. As mentioned in my instructions step 10: "If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible". This screen will be after the warning that your contribution isn't deductible because of your MAGI.

@youngkuurus