Total Basis in Form 8606

[user1899]

I have some very basic questions (I searched but somehow I can't find the answers).

1. I have read that TurboTax automatically generate Form 8606 for me. Where can I see that? (I have input 1099-R and related information but I haven't submitted my tax return yet.)

2. Regarding the "total basis" on Form 8606, my understanding is that "total basis" refers to the portion of my IRA that has already been taxed. The higher this "total basis" is, the less $ I would get double-taxed.

Let's say I contributed after-tax $7k to my Traditional IRA, and I converted that $7k to Roth IRA (within the same month). My Traditional IRA has accrued $10 interest.

So, if I file 8606 myself, line 13 would be $7000 / $7010 * $7000 = $6990 while line 14 would then be $7000 - $6990 = $10. That means the nontaxable portion of all my distributions (line 13) is $6990 while my total basis (line 14) is $10.

According to the definition above, total basis is the portion that has already been taxed, then how come it's just $10? 

3. As stated in the previous point, the $7k contribution is after-tax, and the only pre-tax amount in my Traditional IRA is just $10. Following the pro rata rule, my $7k conversion to Roth IRA should be taxed very minimally. However, looks like TurboTax taxes my $7k (which makes that double-taxed). Is that because of line 14 being $10? Where / how should I correct this?

Thank you so much for your help!!

[DanaB27]

1. Please follow these steps below to see all your forms including Form 8606. Please note, you might have to pay first to be able to view all forms.

1. Select Tax Tools on the left and then Print Center 
2. Select Print, save or preview this year's return

2. Yes, the basis is the portion that has already been taxed. Line 14 lists the total basis that is still remains in the Traditional IRA. You used $6,990 of your basis for the conversion and therefore have a $10 basis remaining in the Traditional IRA to use for future years.

3. When you look at line 18, then you see only $10 are taxed from your conversion. This will carry over to line 4b of Form 1040.

Note, it future when you perform a backdoor Roth is is generally best to convert the gains too.

[user1899]

Thank you so much, @DanaB27 , for your reply!!

1. Yes, I can see the Form 8606 that TurboTax prepared for me!

2. and 3. Please bear with me... just to help me understand the meaning / purpose of Line 14 and 18... In this example:

    a. Do you mean only $10 (Line 18) is taxed for my conversion in this 2024 Tax Return filing, and I am not double-taxed the whole $7000 amount?

    b. So Line 14 Total Basis has no bearing in the 2024 Tax Return but it will be used in 2025 Tax Return?

3. Now I can see the Form 8606 TurboTax prepared, and I think I can see the problem better. My real situation is:

• 2024 April: Contributed after-tax $6500 to Traditional IRA for year 2023
• 2024 April: Contributed after-tax $7000 to Traditional IRA for year 2024
• 2024 April: Convert $13500 from Traditional IRA to Roth IRA
• 2024 Dec: Traditional IRA incurred $16 interest, and that's my remaining balance for Dec 31

On my auto generated Form 8606:

• Line 1 is empty
• Line 2 is 6500
• Line 6 is 16
• Line 8 is 13500
• Line 13 is 6492
• Line 14 is 8
• Line 18 is 7008

     a. Seems like it doesn't know that I have contributed after-tax $7000. Why is that?

     b. I have uploaded my 1099-R . Even though my whole 13500 is after-tax contribution, 1099-R shows 13500 in both Box 1 and 2a, and 2b have both boxes checked. Is that why? How can I tell TurboTax that that 13500 is actually after-tax, so they are not taxable contribution?

     c. This is the first year I have this Traditional IRA account and performed a conversion to Roth IRA, how should I fill out those steps after uploading 1099-R so that I wouldn't be double-taxed the 13500? 

Thanks you so much again for your help!!

[DanaB27]

2. a) Yes, only the amount shown on line 18 is taxed for the conversion. You are not double taxed. 

b) Yes, that is correct. 

3. It seems you didn't enter your nondeductible Traditional IRA contribution for 2024. Please follow these steps to enter the nondeductible contribution to the traditional IRA for 2024:

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 2023 Form 8606 line 14 (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).

[user1899]

Thanks again, @DanaB27 !

Quick question, for step 6, should I enter 13500 or 7000? My understanding is that I can contribute and rollover 2023's $6500 + 2024's $7000 without penalty. I enter 13500 and it says I have penalty due to over contribution. Btw, do I still need to upload 1099-R if I take those steps listed in your reply?

Thank you so much @DanaB27 !

[DanaB27]

You contribution for 2024 is 7,000 therefore you have to enter $7,000 for step 6.

Yes, the backdoor Roth is a two step process, the nondeductible Traditional IRA contribution and the conversion reported on Form 1099-R. Therefore, you will need to enter the contribution in the IRA contribution interview and the Form 1099-R in income interview. 

Please review How do I enter a backdoor Roth IRA conversion?

[user1899]

Got it. Thank you, @DanaB27 !!  That works, and thanks for the link to the help page!

Hopefully last set of more general questions:

1. I contributed the 2023 $6500 to Trad IRA and converted it to Roth IRA in 2024 April rather than in 2023. And more specifically, I took those two actions in 2024 after I filed my 2023 Tax Return.

     a. Do I need to amend my 2023 Tax Return as I didn't report this contribution? But it happened after I had already filed my 2023 tax return...

     b. Do I need to file Form 8606 manually for 2023? Or the 2024 Form 8606 TurboTax generated for me is good enough?

     c. When I file my 2024 Tax Return, I input $6500 as my 2023 Total Basis which is just a number I know is correct, not that I have 2023 Form 8606 in hand (since I have never filed that). Is that ok? 

2. This year I have already contributed and converted $7000 for 2025. Since this happened in 2025 before I file my 2024 Tax Return, do I need to report this contribution and conversion even though it's for 2025?

The Jan-Apr of the "grace period" for contributing/converting for previous year IRA makes me very confused how to report these transactions. Basically I want to see if I need to go back to correct my 2023 Tax Return and what to do with 2025 so happen I did the IRA contrib/conv in the 2024 "grace period".

Thank you so much, @DanaB27 !!

[DanaB27]

1. Yes, you will need to send a 2023 Form 8606 to report the basis to the IRS since you made a nondeductible Traditional IRA contribution. You can use the amend option to fill out the 2023 Form 8606 for you and then mail the 2023 Form 8606 to the IRS.

Yes, you will enter $6,500 as the prior year basis on your 2024 return.

2. The $7,000 contribution for 2025 will be entered next year on your 2025 return. The conversion made in 2025 will be also reported next year on your 2025 return.

Hint, your financial statements should list how much you contributed for each year. If you are unsure please check with your financial institution.