Roth IRA convertion with balance in Traditional IRA

[redmarlen]

My Traditional IRA (before tax) had balance of USD46,779 as of 12/31/2024, I added to it USD7000 after tax (as it turned out during tax return) in 2024, and since they were after tax I converted USD6912 to Roth IRA in 2025 for 2024 during doing 2024 tax return. 2024 tax return has 8606 with USD7000 as total basis. Do I have tax consequences of this operation of about USD1600 because my Traditional IRA before tax had balance? Do that tax consequence is approximately USD1600?

In 2025 I got 1099-R, I input info to Turbotax and Turbotax estimated taxes at about USD 1600 for this conversion for 2025.  But they dissaper when I add my new contribution to traditional IRA I plan to make now for 2025 (also after tax, and I plan also to convert USD7000 of it to Roth IRA). WHat am I doing incorrect?

[AmyC]

1. Yes. Let's work through this.  Traditional IRA balance with pre-tax dollars. Add after tax dollars. Then convert some to ROTH. When you convert some to ROTH, you don't get to pick which of the dollars are converted. Let's do some quick math:

• pre-tax $47k
• after tax $7k
• total IRS =$53k

after tax divided by total is about 13%

2. Convert $6912 to ROTH, then about 13% has already been taxed. The rest is taxable income. Which is about $1600 if you are in the 24% tax bracket.

So far, everything seems to check out correctly. 

3. Adding more income to the IRA is diluting the percentage taxable.

4. Each time you convert, the math process will update  percentages and you will continue paying tax on the non-taxed portion. These are dollars, not stocks, you don't get to pick which ones to use.

[redmarlen]

Exactly. What shall I do if turbotax reverses that USD 1600 of taxes I am going to pay for conversion for 2024 when I add new contribution to Traditional IRA for 2025? Where am I doing mistake and what am I inputting incorrectly to turbotax?

[AmyC]

For your 2024 return, you only report the contribution and show the $7k basis on Form 8606, line 14.

2025 - you made the conversion and is reported on your return.

The mistake- when you contribute another $7k is adds to your total already taxed basis. More importantly, it is triggering the $14k to go against the conversion since it is larger than $6912. 

The problem is you still have a pre-tax balance and the IRS says you must pro-rate using the full balance as the denominator. Somehow the program has forgotten your balance.

Go back through the 1099-R section where you entered the conversion and continue until you see total value of IRA on Dec 31, 2025. Enter the pre tax balance of $46,799 plus any gains/losses. It can't be left blank. Once that is entered, your forms should be back on track.

[redmarlen]

Thank you! I went back to 1099-R (in wages section) but it doesn't ask me total value of IRA on Dec 31, 2025 there. (And do you mean 2024 or 2025? It asked me total value of IRA somewhere but as of 12/31/2024). What shall I do? And what is strange that USD1600 of taxes were reversed when I added new after tax contribution to traditional IRA for 2025.

I suspect I am doing mistake answering qiestions for Traditional IRA contributions for 2025. 

This year I wanted to do the same - contribute USD7000 to Traditional IRA (after tax because of income) and convert it to Roth IRA (because I am not eligible to contribute to Roth IRA straight). So I started to do Traditional IRA contribution for 2025. I answered "No" to "Did Maryna recharacterize any of the Traditional IRA contributions for 2025 over to Roth IRA? This does not include conversions or rollovers". I answered "Yes" to "Did Maryna make any nondeductible IRA contributions to your Traditional IRA from 2024or prior years?". I answered 7000 to "If Maryna made any nondeductible contributions in prior years, look at Maryna's most recent Form 8606. Find the box called total basis and enter the number from that box below. If you never filed a Form 8606 just enter 0 (zero).

What was Maryna's total basis as of December 31, 2024?" After answering this question Turbotax increased my refund on those USD 1600, so I am doing mistake somewhere in these answers. Please help

[AmyC]

The 2024 was just the contribution and simple. The 2025 return is when things got messy. I just wanted to state what I thought was happening and clarify any issues.  No, the program is just not picking up the rest of your IRA so it is assigning the $14k basis to the amount rolled over. We have to get your 2025 value into the program.

Are you using desktop or online? I am seeing the issue in the desktop version and there is an easy fix. The IRA info Wks holds the key. If you are using desktop:

Switch to Forms mode

1. Locate the IRA Info Wks on the left side
2. Go to Part IV, Line 18
3. Enter the 2025 value

[redmarlen]

I am using online version because I am connecting through Metlife to use the discount. Can I do it in online version?

[RobertB4444]

You can.  It's harder, though.

[redmarlen]

how do I do it in online version, please?

[RobertB4444]

I'm sorry, @redmarlen .  I just tried in the online version and I can't make it work.  You'll have to switch to the desktop version to make this work.

[redmarlen]

How can I switch to desktop version and use Metlife legal plan discount, please? Will I need to start in desktop version from the beginning?

I just tried to delete the 1099-R info in wages section and inputed everything again, but it didn't ask me about if I want to tkack the tax basis of IRA for future use. So it was not there. And after I deleted section in deductions about Tradi tional IRA contributions and did everything again it didn't ask me too. So where can it be?

[RobertB4444]

You will need to start in desktop version from the beginning,  And I am afraid I don't know if the Metlife discount applies to the desktop version.  You will have to ask Metlife that.  But roll last year's return into the desktop version and that should solve the problem for the balance in the IRA and the taxes due.

[redmarlen]

This will not work, can we create case for turbotax support to solve this issue for online version? I can not do averything again and pay for it just to realise desktop has some other issue and I can not file again

[AmyC]

Group effort. For the online version, a team member found a place to do the entry that might help you.  When you get to this screen you need to make certain that the amount in the first box is greater than or equal to the amount in the second box. We al hope this is the solution. 

If this does not work:

• @RobertB4444  helped come up with the above solution and also recommended you start over and import last year's taxes. This would ensure a smooth flow, not that you actually have to redo your entire return. If you had a simple return, this would be a great solution. Yours sounds more complicated so you probably want to convert instead.
• You can convert to desktop. You will pick up right where you left off.    
• You may want to pay for your online return and then contact customer service and tell them community team says you need the desktop to finish your return. They should tell you how to swap out for no extra charge.