Traditional IRA conversion to Roth IRA tax treatment

[laurieandbillmcd]

In 2019 I converted a traditional IRA to a Roth IRA. The 1099-R shows the gross distribution as $18,831 and taxable amount is the same, both boxes in 2b are checked, and the box 7 distribution code is 2. However, the traditional IRA had a basis of $18,000, because all of my contributions were non-deductible. PROBLEM: After entering all this info in TurboTax, it is including $17,995 of the $18,831 in my income. That's like taxing me twice on the non-deductible contributions, isn't it? It's making the tax due too high. I've been through the related interview sections and the tax forms view in TurboTax and still can't figure what is causing this.  Am I missing something or is TurboTax not calculating this correctly?

[macuser_22]

Yes, you must have missed the interview to enter your prior years non-deductible "basis".

How much will be taxable depends on the 2019 year end IRA total value.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

[laurieandbillmcd]

Thanks for the advice. I went through the whole thing again, but got the same result. I had not missed entering anything.

We also rolled over two 401K plans to IRAs in 2019, one for me and the other for my spouse (with zero tax due). Is this what is causing it? On the worksheet that feeds Form 8606, it appears that having those amounts included in the total IRA amounts at the end of 2019 is what may be driving such a high taxable amount for the Roth conversion, thereby offsetting the IRA basis for the one I converted to a Roth. Does that make sense?

Or perhaps TurboTax Deluxe can't properly account for all of that in one year?