How do I enter a backdoor Roth IRA conversion?

[DanaB27]

Yes, you can do that. Just make sure you enter your basis from your 2021 Form 8606 line 14 during the interview (if TurboTax doesn't carry it over automatically).

Next year on your 2022 tax return:

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 contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2021 Form 8606 (if you had a basis in the prior year)
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?" 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

@barathvasu

[csbatla]

Me and My wife both did Trad IRA to Roth IRA conversion last year for $6000 each. I followed all steps and see that it did not add any tax I owe but on for 1040 in 4a it has 12000 and 4b has $6000. It also gave a message of my income is over $125000. Did I miss any step, why it is not showing 0 in 4b

[Anonymous]

I have been trying to enter the NON DEDUCTIBLE, but it never comes up to be selected under Deductions & Credits.  I've been trying for 3 hours to get it to work but nothing.  They said it would be fixed by 3/22/22?  But obviously, it hasn't.  I'm using Deluxe.  That shouldn't be an issue what version since someone said the Premier doesn't work either.  HELP!!!!!

[Anonymous]

This portion of the instruction example does not appear at all, no matter how many times or options I try to make it appear.   I selected, copied and pasted but the screenshot photo part is not showing when I paste it.

Step 1 Instructions:

This section never come up to be able to select it?

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, enter the amount you contributed, and Continue
Choose not to deduct IRA contributions   TTD.png

Please fix it.  I am paying $4000 more taxes without the fix. This is 4/13/2022 and it's still not fixed.

[Anonymous]

There is no LEFT MENU?  to find Tax Tools?   There's nothing on the left at all.  I can't even find  menu at all with Tax Tool or anything like it anywhere on Turbo Tax 2021??? Not any drop down and search field can find it.

Why are these instructions totally wrong?

Then I tried the Search for "IRA Contributions" and Jump to, Nothing even matches, just old notes about issues?

Please, when you construct these directions, use the same turbo tax we do.  It would be helpful if you had the same problems we're having so they can actually be solved.

[Anonymous]

Does the backdoor Roth conversion not work if you have a large amount in your Traditional IRA to begin with?  Does it disqualify the conversion?

Also, if your income is too high per your MAGI, does that also disqualify the IRA deduction?  Just that I keep getting nowhere trying to enter my husbands $6000 with the conversion to Roth.  It never brings up the choice for NON-Deductible after "Did you change your mind". or any other question.  Then at the end, it says your income is too high for both of us.

This is my first time trying this for  2021 and I think it backfired, since it was done at the beginning of 2021.

Too late to reverse it.   I have no previous Non-Deductible contributions for 2020 or prior years.

Since I contributed the $7000 into the Traditional, won't that still be tracked as Non-Deductible, even though it was converted to Roth?

Please advise if it can work for us or not?

Thanks,

[DanaB27]

Please make sure that you make the contribution nontaxable for both you and your wife. Also, if you had any basis from the previous year (2020 Form 8606 line 14) make sure you enter this during the interview when TurboTax asks if you tracked prior nondeductible contributions.

@csbatla

@Anonymous Yes, if you have pre-tax fund in your traditional, SEP, SIMPLE IRAs then the backdoor Roth won't work since the pro-rata rule applies. 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.

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.

Please be aware, that if you have a retirement plan at work and are over the income limit the traditional IRA contribution will be nondeductible automatically. You will only get a warning that your income is too high to deduct the contribution and then a screen saying $0 is deductible. This is what you want a screen that says $0 are deductible.

If you are using TurboTax Desktop/Download then please try the steps below.

To enter the nondeductible contribution to the traditional IRA:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
10. Enter your basis in the Traditional IRA from your 2020 Form 8606 (if you had a basis in the prior year)
11. 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 "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
12. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[Omaestrq]

My wife and I put 6k each into a traditional ira and coverted it immediately for the first time to a backdoor roth ira in jan 2021 for the 2021 return. How would I go about that on turbotax. Im so confused. Its asking me cost basis for 2020. I never contributed prior to 2021.

[sureshr]

Hi Dana,

I am doing backdoor Roth for over 4 years and reporting through Turbo Tax. In 2020 it so happened that I contributed to Traditional IRA 6000$ in on Dec 24th 2020 and rolled all of it over to Roth IRA on Jan 1st 2021. When I am doing 2020 tax returns in Turbo Tax, I had a problem with 1099-R and a tax expert helped me to enter these amounts so that my federal tax due and state refund does not get effected. When I check FY 2020 Form 8606 column 14 "your total basis in traditional IRAs for 2020 and earlier years", it says 12000 instead of 24000. 

I did backdoor Roth in 2021 again (all in October including Roth conversion). When I am doing tax return for 2021, I answered Yes to "Any Nondeductible Contributions to IRA". Then I tried to enter "Total basis as of December 31, 2020 as 24000" instead of 12000. Is this right? 

If this is right and I proceed further it is asking me "Prepare an Explanation" since the basis is changed from 2020 to 2021. Also the California Refund bumped due to the value basis I entered, which I am not supposed to receive I guess. Please suggest what to do.

Thanks in advance.

[macuser_22]

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@sureshr wrote:

Hi Dana,

I am doing backdoor Roth for over 4 years and reporting through Turbo Tax. In 2020 it so happened that I contributed to Traditional IRA 6000$ in on Dec 24th 2020 and rolled all of it over to Roth IRA on Jan 1st 2021. When I am doing 2020 tax returns in Turbo Tax, I had a problem with 1099-R and a tax expert helped me to enter these amounts so that my federal tax due and state refund does not get effected. When I check FY 2020 Form 8606 column 14 "your total basis in traditional IRAs for 2020 and earlier years", it says 12000 instead of 24000. 

I did backdoor Roth in 2021 again (all in October including Roth conversion). When I am doing tax return for 2021, I answered Yes to "Any Nondeductible Contributions to IRA". Then I tried to enter "Total basis as of December 31, 2020 as 24000" instead of 12000. Is this right? 

If this is right and I proceed further it is asking me "Prepare an Explanation" since the basis is changed from 2020 to 2021. Also the California Refund bumped due to the value basis I entered, which I am not supposed to receive I guess. Please suggest what to do.

Thanks in advance.

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Look at the last filed 8606 and enter the line 14 amount whatever it is.

[yduane]

After I imported 1099-r, federal tax doesn't increase, but state increases, why? I did immediate conversion, should not increase tax at all.

[sureshr]

FY 2017:

I contributed $5500 after tax money to Traditional IRA and did back door Roth to Roth IRA.

Form 8606: Box 14:  This is your total basis in traditional IRAs for 2017 and earlier years -- $5500

FY 2018:

I contributed $5500 after tax money to Traditional IRA and did back door Roth to Roth IRA.

Form 8606: Box 14:  This is your total basis in traditional IRAs for 2018 and earlier years -- $11000

FY 2019:

I contributed $5500 after tax money to Traditional IRA and did back door Roth to Roth IRA.

Form 8606: Box 14:  This is your total basis in traditional IRAs for 2019 and earlier years -- $16500

FY 2020:

I contributed $6000 after tax money to Traditional IRA in Dec 2020 and did back door Roth to Roth IRA in Jan 2021. Since the 1099-R balance still showing $6000 and for some reasons that I forgot turbo tax expert helped me to answer back door Roth questions.

Form 8606:

Box 1: 6000.    Box 2: 16500.      Box 3: 22500.     Box 5: 22500     Box 13: 11000

Box 14:  This is your total basis in traditional IRAs for 2020 and earlier years -- $11000

My total non deductible IRA contributions are $22500 not Box 14 $11000 from previous year 8606. This is the issue.

[DanaB27]

If you didn't make nondeductible contributions in 2020 and therefore you do not have a basis in prior years then you will enter $0 for the prior year basis.

@Omaestrq

@yduane You might have to answer some questions during the state interview. What is your state?

@sureshr It seems that your 2020 Form 8606 shows a distribution or conversion since it has an entry on line 13. If this isn't correct then you will have to amend your 2020 tax return to correct the 2020 Form 8606. 

In the earlier post, you stated that you have been doing backdoor Roth for the past 4 years but your Forms 8606 only show contributions, not conversions. To confirm, you only made contributions in 2017, 2018, and 2019 and didn't convert them until 2021?

Please be aware, that usually with backdoor Roth you make the nondeductible contribution and then convert the funds. Therefore, the basis on line 14 isn't growing like in your case, it is either $0 or only has the last year's contribution as the basis.

[CCC261]

is?  This is absolutely ridiculous how TT2021 handles this subject.  I ended up have to go in and manually fill out my own 8606 forms  What value if TT Premier if it can't do this?  Going to go to competitors net year, I don't pay TT2021 to just import my forms for me.  I should not have to go read all the booklets and forms myself to figure out.  

[macuser_22]

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@CCC261 wrote:

is?  This is absolutely ridiculous how TT2021 handles this subject.  I ended up have to go in and manually fill out my own 8606 forms  What value if TT Premier if it can't do this?  Going to go to competitors net year, I don't pay TT2021 to just import my forms for me.  I should not have to go read all the booklets and forms myself to figure out.  

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TurboTax does indeed include the 8606 if it is needed.  It cannot add a 8606 that is not in the name of the taxpayer or spouse.

You don't normally enter a 8606 itself. It is automatically created when:

1) You make a new non-deductible Traditional IRA contribution.
2) You take a distribution from a IRA that has a after-tax "basis".
3) You make a conversion of a retirement account to a Roth IRA
4) You have distribution from Roth IRA.


[For more information:
See IRS 8606 instructions
https://www.irs.gov/pub/irs-pdf/i8606.pdf
"Who must file" page 1.]

If none of those occurred, then the last filed 8606 remains in effect

There are some circumstances when a 8606 must be filed for other reasons and might require filing a stand-alone 8606.