Traditional IRA to Roth IRA

[vikasn71]

I have deposited around $500 to traditional IRA from my bank account (taxed money) and transferred all that amount to ROTH IRA within 10 days for deposit to tradition IRA as a backdoor ROTH IRA conversion.

I received to 1099-Rs, one for ROTH and one for traditional IRA. When I upload both the forms to turbo tax, the system is taxing for the $500 which I converted from traditional IRA to ROTH. Why I'm I being taxed for that amount? Please suggest.

Traditional IRA 1099-R
Traditional IRA 1099-R

Roth IRA 1099-R
ROTH IRA 1099-R

[ThomasM125]

For one thing, you received a Form 1099-R reporting a $500 distribution from your Roth IRA. The code "J" on it indicates that it is an early distribution, so the earnings on it would be subject to a penalty tax. Also, I don't know why you received that because you only mentioned you transferred money from a traditional IRA to a Roth IRA. As such, there would be no distribution from the Roth IRA.

It is possible that you made a contribution to the Roth IRA in error, then withdrew it, put it into the traditional IRA then rolled it over to the Roth IRA.  If so, you should have code "P" in box 7 and any earnings should be in box 2.

The $503.89 distribution from the traditional IRA would be taxable unless when you made the entry for the contribution to it you indicated that it was a non-deductible contribution. Here are instructions on how to enter a backdoor Roth IRA conversion:

For the backdoor IRA, enter a traditional IRA contribution in the Deductions and Credits section of TurboTax, then Retirements and Investments, then Traditional and Roth IRA Contributions. Indicate that your traditional IRA contribution is non-deductible when asked in the program.

When you enter the 1099-R form in TurboTax for the rollover of funds to the Roth IRA, you need to first indicate that you moved the money to another retirement account and that you did a combination of rolling over, converting or cashing out the money. Then, enter the amount converted to a ROTH IRA. Later on you need to indicate that you tracked non-deductible contributions to your IRA.

Later in the routine enter the basis (non-deductible contributions) of your traditional IRA at the end of the previous year, and later the value of your traditional IRA at the end of the current year.

[vikasn71]

Thanks @ThomasM125 , You're right. I have checked my transaction history.  I made a cash contribution to Roth IRA by mistake and withdrew everything and then put it to traditional IRA and converted it to ROTH IRA after 10 days

Do I have to pay penalty for that?  How do I proceed in filing?

[ThomasM125]

You can make a corrective distribution up to the due date of your tax return without paying a penalty. You would have to pay tax on any earnings though, but there is nothing listed for that on your Form 1099-R, so you should not be facing any penalties or taxes on it.

[MaryK4]

See ThomasM125's answer.