How do I enter a backdoor Roth IRA conversion?

[omkarprabhu]

I see 0 deduction. But in Tools > Tax Forms > Summary I see a Penalty which I shouldnt see for contribution. Do you think I should share the file with the agent?

[prime2311]

I have the same issue, the moment I enter the 1099-R, my taxable income and tax goes up. I think the TurboTax SW is broken, and cannot relate that there is non-deductible traditional IRA that got converted to Roth. Seems like unreliable/untested SW released to millions of Americans.

[DanaB27]

Do you have the penalty on Form 5329, Part IV? To confirm, you only entered the traditional IRA contribution, you didn’t a Roth IRA contribution, correct? I’m more than happy to look at the file (which will only show the numbers but not any personal information).

@omkarprabhu

@prime2311  To verify, your traditional IRA didn’t have any deductible contribution in it before making the nondeductible contributions? You need to have an empty traditional/SEP/SIMPLE IRA before you start with a backdoor Roth. If you have deductible funds in it each distribution/conversion will have a taxable and nontaxable part. Did you contribute in 2021 for 2021 and convert it right away in 2021? If you provide more information, I’m happy to try to help.

[prime2311]

I have shared the file with TurboTax and have token Id. How do I unicast that to you to get help?

Following are details:

- I made only traditional IRA contribution - no Roth IRA contribution outside of the employer 401K Roth plan.

- In my 1099-R, I confirmed it has Box 2a, Box 7 (type 2) and SEP/Simple IRA box checked.

- I converted the traditional IRA contribution immediately to Roth (within a week).

[prime2311]

Also, all of my traditional IRA contribution is non-deductible.

I am using online TurboTax through www.turbotax.com

[prime2311]

Tax penalty shows 0 under "Review tax penalty -> Estimated tax penalty".

Under Tools -> "Review 1040" I noticed 4a and 4b both show $6000, even though my traditional IRA was non-deductible (I am over the limit for tax deduction in traditional IRA).

[DanaB27]

If you provide me with the token number then I can take a look.

@prime2311

[prime2311]

Its 956051

[DanaB27]

I reviewed your return. 

It seems you have only nondeductible IRA contributions made in 2022 for 2021. These amounts will be converted in 2022 and this conversion belongs on the 2022 tax return.

Did your spouse have a basis (nondeductible contribution) from 2020 since she made a conversion in 2021? Please check your spouse's 2020 Form 8606 line 14.

@prime2311

[prime2311]

My IRA provider sent me 1099-R for 2021, for this non-deductible IRA conversion from traditional IRA to Roth IRA for the year 2021. Do I need to ignore that and not enter in my 2021 tax return?

My spouse didn't have a basis for traditional IRA in 2020. I was trying out various options hence selected that to see if that makes a difference.

[DanaB27]

No, you need to enter and report the 2021 Form 1099-R that you received for your spouse's conversion. Did your spouse have deductible funds in her traditional IRA? If yes, then this conversion would be taxable. 

To verify, you made the contributions for 2021 in 2022, correct?

@prime2311

[prime2311]

My spouse didn't have any deductible funds in traditional IRA.

We made this non-deductible contribution in Jan 2022 for 2021.

[DanaB27]

Where did the funds that your spouse moved from the traditional IRA to Roth IRA reported on the 2021 Form 1099-R come from? If they were nondeductible your spouse should have a basis from your 2020 tax return? Or did your spouse make accidentally two contributions for 2021 (one in 2021 and one in 2022)?

@prime2311

[prime2311]

Thank you for highlighting the problem. It is solved now.

The issue was that I contributed for 2021 non-deductible IRA in 2021, but by mistake put the contribution in Jan 2022 (the Jan contribution I did was for year 2022, not 2021). After changing "contribution made between Jan1 and April" to 0, in Traditional IRA contribution, the issue got resolved, and there is no additional tax.

[swturner33]

I'm having the same issue as others in this thread.  Made backdoor Roth conversions of $7000 each for my wife and myself.  My traditional IRA had $0.86 left in it from a previous year, which I swept up in the conversion.  Our AGI is over the limit, so all of the $14000 contribution to the traditional IRAs was non-deductible.  Despite following the "3 step" instructions on backdoor conversions carefully and repeatedly, on our 1040, both 4a and 4b show 14000.  I expect 4a to be 14000, and 4b to be 0.

I have submitted a file under token number 956738 in hopes that I won't have to wait until 3/31 for a bug fix.