How do I enter a backdoor Roth IRA conversion?

[peteknepell]

This is CRAZY!!! It's been a problem since 2012 and maybe earlier. Why is it called a "backdoor conversion"? Because Turbo cannot handle it directly.

Why can't Turbo be programmed to help us through this procedure?

The 3-stap procedure listed here and elsewhere did not work for my Premier 2021 version. I deleted everything and tried again and still didn't work - waste of time.

My Solution:

1. If you took money out of a traditional IRA for conversion to a Roth, do not enter any 1099-R info in Turbo.
2. Complete the rest of your return.
3. Print out your return.
4. Hand enter the amount converted in Line 4a and be sure that 4b is blank (or correct).
5. Remove any Form 8606 in your print out. Fill out the IRS Form 8606 on your own and put in return.
6. Mail in your return.

Good luck with this "backdoor conversion".

[peteknepell]

DanaB27: Your response did not answer the question.

[omkarprabhu]

Thanks @DanaB27 .  Thanks again for the valuable info. Can you explain a little bit what does it mean that the rest of the basis is carried forward to future years so that I can plan? I will pay taxes on the 5210$ now but what does that mean for the future? Can I move money from Traditional IRA to Roth every year based on the rest of the basis? For example - My Basis is 

2016 (Roth IRA Balance $36,924.69) + 2017 (Back Door IRA 5500) + 2018 (Back Door IRA 7000) + 2019 (Back Door IRA 6000) = 55424.69.  Is this correct method to calculate basis. 

This year based on this - if I pay taxes on 5210 - What does that mean for future years?

[DanaB27]

Please be aware, you have the Roth basis and the traditional IRA basis.

The basis in the traditional IRA is tracked on Form 8606. You will have the leftover basis listed on line 14 (the basis for 2021 and earlier years). This basis will be allocated to each traditional IRA distribution (Or if you make a conversion) you make in the future. 

Yes, you will need to keep track of your direct contributions to the Roth and any conversions to the Roth separately.  You also need to keep track if you make distributions from the Roth. This is only important if you plan to take a nonqualified distribution from your Roth before you are 59 1/2 and had the Roth account for less than 5 years. Then TurboTax needs the net contribution (contributions minus withdrawals) and conversion information to calculate how much of the distribution is allocated to the earnings. You can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. When you take Qualified Distributions then the full amount will be tax-free.

So assuming the $36,924.69 are direct contributions to the Roth and you didn't make any withdrawals then you would track 36,924.69 as net contributions. And the conversions you will need to track separately. You can find this information on your "IRA information worksheet" if you used the option for TurboTax to track your Roth basis. You can see that TurboTax tracks your 2021 conversion on line 59 2021 conversion contribution taxable at conversion $(5,210) and line 60 2021 contribution conversion not taxable at conversion ($790).

@omkarprabhu

[Jasmine 110]

I need something to print out on the above subject because I have trouble reading instructions and entering in the turbotax premier 1099-R which people tell me I should be entering in form 8606 for a backdoor roth

[DanaB27]

Please see the instructions below on how to enter a backdoor Roth correctly into TurboTax Premier Online. You can click on the 3 dots on the top right of an answer and select to print it.

To enter the nondeductible contribution for 2021 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 warning and then 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 from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

@Jasmine 110

[620kansas]

@DanaB27 I've been reading your detailed summaries and I am hopeful you can help with my situation:

- my token is 965504

- This is my first time doing a backdoor Roth conversion

- I put $6000 into an empty Traditional IRA on 3/03/2022
- I converted/moved the $6,000 into a Roth IRA on 3/14/2022 (two weeks later)

- I used post-tax dollars

- I do not have a workplace retirement savings plan

- I have never received a 1099-R

- I have not taken any distributions

- I earned above the single filer threshold $$$,$$$

Questions: 

- could you please walk me through how to enter this into Turbo Tax Online?

- do I report the *contribution* on the 2021 return? and how?

- do I report the *conversion* on the 2021 return? and how?

- how do I double check I entered everything accurately?

- am I paying taxes on any of this now? 

Thank you!!!! With gratitude!

[TurboTaxLucyB]

Thanks for this detail - I followed it and have the same situation.

But the form 1040 did NOT show the $0 in 4b as expected?

Have deleted the deduction and 1099-R basis several times to see if I entered it incorrectly, but still showing that I owe taxes?

[DanaB27]

To be able to help you further I will need to know if the contribution that you made 3/03/2022  was for 2021 or 2022? If it was for 2022 then you will not enter anything on your 2021 tax return.  If it was made for 2021 then you will enter the nondeductible contribution on your 2021 tax return. TurboTax will create Form 8606 with a $6,000 basis on line 14. This  $6,000 basis you will enter on your 2022 tax return when you report the conversion. The conversion belongs on the 2022 tax return because it happened in 2022. You will get a 2022 Form 1099-R next year.

@620kansas

@TurboTaxLucyB Did you have any earnings before you made the conversion? Earning will be taxable and show up on line 4b. 

Another reason why you can have a taxable amount on line 4b is if your traditional IRA account was not empty and had pre-tax funds. Then the pro-rata rule applies and part of your conversion will be taxable and part nontaxable. The rest of your basis will be carried forward on Form 8606 to use in future distributions/conversions.

If none of these suggestions solve your issue I'm happy to take a look at your file if you tell me your token.

[620kansas]

@DanaB27  thank you for your quick reply! 

Correct — the aforementioned 3/3/22 deposit was a 2021 contribution. 

To clarify, form 8606 will be created *now*, not during the 2022 tax cycle?

To clarify, I should be looking for $6,000 on line 14a or 14b?

Finally, I plan to make another $6000 contribution and perform another backdoor conversion in late winter 2022 for the 2022 tax year. Do you have any advice or guidelines on how to go about doing this properly with regards to correct documentation on 2022 taxes filed in 2023? What will the numbers look like for two contributions and two conversions performed in the year 2022 for two separate tax years (2021 and 2022)?

[DanaB27]

Yes, since you made the $6,000 contribution for 2021 you will enter it on your 2021 tax return and make it nondeductible:

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 $6,000
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. 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 warning and then a screen saying $0 is deductible).

TurboTax will create Form 8606 and you will have the $6,000 listen on line 1, 3 and 14 (there is only line 14 on Form 8606 no a or b).

Next year on your 2022 tax return:

To enter the $6,000 nondeductible contribution to the traditional IRA for 2022:

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 $6,000
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” since you had a nondeductible contributions before this tax year.
9. Enter the $6,000 basis in the Traditional IRA from 2021 Form 8606 line 14.
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 warning and then a screen saying $0 is deductible).

To enter the 1099-R for both 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" after entering all 1099-Rs
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 from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

When entered correctly only the earnings should be taxable on line 4b of Form 1040 in the 2022 conversion. The $12,000 should be tax-free because you made nondeductible traditional IRA contributions. Please be aware, if you had any pre-tax funds in your traditional, SEP, and SIMPLE IRAs then this won't be true since then the pro-rata rule applies.

@620kansas

[jred81]

I cannot get this to work. The prompt screens do not align with these directions.

[jred81]

Need assistance, Token # 969502

[DianeW777]

Your token was very helpful.  There are some actions you must take to properly reflect your backdoor conversion from your traditional IRA to your Roth IRA. 

1. You must remove the Roth 'recharacterized' amount from your IRA contribution screen. This section believes you decided to change your initial contribution to a Roth instead of a traditional IRA which would not be allowed based on your income.
2. Be sure to enter your $1,000 in the screen 'Excess contribution withdrawn before the due date of your return' in the traditional IRA because you are not yet 50 years of age (in the file I received).
3. The Form 1099-R was completed correctly except you must make one Forms 1099R for $6,000 only. 
4. The taxable amount should be only earnings, not any part of the $6,000  
5. Once these actions are completed you should be able to complete your tax return.

[jred81]

I think this is working now. Can you check updated Token?  969583

For the 1099-r, I kept the value at 7k since that is the amount I received on the form from Fidelity.