How do I enter a backdoor Roth IRA conversion?

[DanaB27]

Yes, everything looks correct. 

@Wyldaisy

That is strange that Fidelity doesn't allow you to make a Roth conversion on an amount contributed to the traditional IRA. The conversion would count for the year 2022 and it would be just a regular conversion. The backdoor techniques are all applied by entering the correct information in the tax return (making the contribution nondeductible, tracking it on Form 8606, entering Form 1099-R for the conversion). Of course, this backdoor Roth technique only works if the traditional IRAs are empty (don't have pre-tax funds).

@trbelair

[dvu]

Hello.  Having issues with backdoor roth.  I contributed 6k for me and 6K for wife into IRA for the first time in march of 2021 for the 2020 tax year.  Then I contributed another 6K for each of us in October of 2021 for the 2021 tax year.  Filled out for 8606 for 2020.  For 2021 I now have a 1099 R form.  When i enter in the info for 1099 R (12 K for me and 12K for my wife) i get taxed.  I sent in a diagnostic copy of my return without the 1099 R form as I get hit with a tax.  the number is 985421.  Thanks

[DanaB27]

I reviewed your file. You didn't enter your $6,000 basis from your 2020 Form 8606 line 14. Line 2 of your 2021 Form 8606 should be $6,000 and then line 3 will be $12,000.

Please follow these steps to enter your basis from 2020 when you are in the retirement section (steps 6 and 7):

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 "Review your 1099-R info" 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

@dvu

[dvu]

That did the trick.  Thanks so much.

[barathvasu]

I still have same problem as outlined by these folks, I followed the steps outlined in 
https://ttlc.intuit.com/community/entering-importing/help/how-do-i-enter-a-backdoor-roth-ira-convers... and I narrowed down the problem, 
In the screen where it asks "Tell Us How Much You Contributed" If I enter the total amount as 6000 and hit continue things work properly. But if I fill "Tell how much you contributed for 2021 between Jan 2022 to April 18 2022, if I enter it as 6000, then I owe taxes, which should not be the case since its back door. How do I resolve this error?

Note: I contributed $6000 for the year 2021 only on Feb 2022. Also the 1099-R which I got should be for the contribution which I did for 2020 Tax year on 2021 Feb. Please let me know how to resolve this issue 

[DanaB27]

You will have to enter the basis you have from the contribution for 2020 during the interview (steps 8 and 9 when you enter your contribution for 2021 or steps 6 & 7 when you enter your conversion). The basis should be listed on our 2020 Form 8606 line 14.

Yes, you will enter the contribution for 2021 on the "Tell Us How Much You Contributed" screen and enter it under "Tell how much you contributed for 2021 between Jan 2022 to April 18, 2022”

To enter the nondeductible contribution to the traditional IRA for 2021 made in 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
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 contribution before this tax year.
9. Enter your basis in the Traditional IRA from the contribution for 2020 (shown on your 2020 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 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 "Review your 1099-R info" screen click "continue"
6. Answer "yes" to "Any nondeductible Contributions to your IRA?" since 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

@ barathvasu

[barathvasu]

@DanaB27 

Thanks for your reply!!! I have some clarification on your steps. Please let me know on the following 

1.

<Name> total Basis as of Dec 31, 2020. Even though I contributed for the year 2020 between Jan 2021 - April/May 2021, Still I can enter the amount mentioned in my Total Basis 14th line of 8606 correct?

2.

What should I enter for "Tell Us the Value of All Your Traditional IRA Accounts" I believe I should enter "
<Name> Traditional IRA's on Dec 31, 2021, Can I enter $6000 here in this box even though I immediately convert my traditional IRA to Roth IRA?

3. 

For interview step 7  in 2nd part i.e. to enter 1099-R conversion:
What should be the value of All Tradition, SEP and SIMPLE IRA's, where will I find this amount?
FYI.. So far I contributed $6000 for 2020 in the year 2021 + $6000 for the year 2021 in the year 2022 to Traditional IRA and immediately converted to ROTH IRA

4. As part of your steps mentioned step #10 never came for me, but the amount is non-deductible.

Verification Steps in 1040 Federal Form with 8606:

1.

I dont see Line#20 IRA Deduction in my Schedule 1.

2.

I see the following in my 1040, is that correct?

Enter your nondeductible contributions to traditional IRAs for 2021, including those made for 2021
from January 1, 2022, through April 18, 2022. See instructions . . . . . . . . . . . . . 1. $6000
2 Enter your total basis in traditional IRAs. See instructions . . . . . . . . . . . . . . . 2 $6000
3 Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 $12000

3.

When I am trying to verify 1040 (8606). I have the following "Subtract line 13 from line 3. This is your total basis in traditional IRAs for 2021 and earlier years" $6000. Is this correct amount? So far I have contributed for 2020 ($6000) and 2021 ($6000)

4. Also line 13 has astricks against $6000* what does that mean?

[DanaB27]

1. Yes, you will enter the total basis from your 2020 Form 8606 line 14.

2. You will enter the value from your year-end statement on December 31, 2021.

3. You will find the value on your year-end statement. If you have more than one traditional/SEP/SIMPLE IRA then you will need to add them up.

4. Yes, as mentioned if you have a retirement plan at work and are over the income limit it will be nondeductible automatically. You only get a warning that your income is too high to deduct the contribution and then a screen saying $0 is deductible.

Yes, your 2021 Form 8606 seems correct. You had a total basis of $12,000 (line 3) in 2021 from your 2020 and 2021 contribution. You converted $6,000 in 2021 and therefore have $6,000 basis left on line 14 (this will be carried over to your 2022 return).

The * means that TurboTax used the "Taxable IRA Distribution Worksheet" per Pub 590b to make the calculations. You will find it in your documents if you want to take a look.

@barathvasu

[barathvasu]

Thanks! This helps ,finally I am able to resolve the backdoor Roth issue! Just a quick note, as I mentioned in the note before, there is no statement for my TraditionIRA because I transferred immediately to ROTH IRA, when I verified with my bank they said  $0 balance in this account as of 12/31/21. So I believe for my 2nd and 3rd question on the above post I will enter it as $0. Please confirm!!

[DanaB27]

Yes, if your balance is $0 in all of your traditional IRA accounts as of 12/31/21 and you didn’t get a statement then you will enter $0 as the value.

@barathvasu

[msumich]

Token 987865 Still can't get the program to accept the conversion. I never get to the "Choose Not to Deduct IRA Contributions" window.

[DanaB27]

Thank you. I reviewed your file. Your contributions are nondeductible.

Please be aware, if you have a retirement plan at work and are over the income limit it will be nondeductible automatically. You only get a warning that your income is too high to deduct the traditional IRA contribution and then a screen saying $0 is deductible. TurboTax created Form 8606 for you and your spouse.

Please be aware, in your case the conversion is partly taxable because the pro-rata rule applies since you have pre-tax funds in your traditional/SEP/SIMPLE IRA. This means that with each distribution/ conversion you will have a taxable and nontaxable part. You can see the remaining basis on line 14 of Form 8606, this basis can be carried forward. Therefore, each distribution/conversion in the future will have a taxable and nontaxable part until the basis is all used.

The Backdoor Roth only works if your traditional/SEP/SIMPLE IRAs are empty.  If you plan to use this strategy in the future you might want to think about a reverse rollover where you rollover IRA money to a company plan, like a 401(k). Only pre-tax funds can be rolled from an IRA to a company plan. Therefore, you would isolate the basis and could start the Backdoor Roth procedure fresh. But it only works if your employer allows it, not all plans do.

@msumich

[msumich]

I'm not doing anything differently from all the previous years of converting. There was 0.02 in the trad ira when I contributed 7K in Jan 2021 and days later converted the 7000.02 into my Roth. Previewing the 1040 shows line 4a as 7000 and taxable line 4b as 6955. Why is 4b not zero as in previous years? I have tried deleting and re-entering the 1099R.

[kim1982]

Hi - I made a backdoor Roth contribution in March 2022 for 2021.  I understand I need to report the $6,000 contribution on my 2021 return, but I get the message about "Income Too High To Deduct an IRA Contribution."  Do I ignore the message about needing to withdraw the money before filing my 2021 return since I will get the 1099-R for my 2022 return?  Please advise. Thanks!

[gpolkin1]

I was completely confused by the TurboTax software flow.  I was ready to switch to another software after entering everything.   These instructions seemed to do the trick.

https://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html