I'd like to do a backdoor Roth IRA this year. But the Traditional IRA account is a mix of deductible and nondeductible contributions from previous years.
When I file my taxes next year, will TurboTax be able to handle this situation? Thank you!
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Yes, but keep in mind that only part of the conversion will not be taxable. TurboTax can handle that when you enter your previous non-deductible contribution from the last 8606 form filed and the total year end value of all Transitional IRA accounts.
You can NEVER withdraw ONLY the nondeductible part - it must be prorated over the entire value of ALL Traditional IRA accounts. (For tax purposed you only have ONE Traditional IRA which can be split between as many different accounts as you want, but for tax purposes they are all added together).
For example using rough figures: if you had $60K of nondeductible contributions in an IRA with a total value of $600K (10:1 ratio), then when you take a $60K distribution from any IRA account $6,000 would be nontaxable and $54,000 would be taxable (same 10:1 ratio), with the remaining $54K of basis staying in the IRA for future distributions. As long as there is any money in the IRA, there will be some basis.
This calculation is done on line 6-15 on a 8606 form when you have a distribution from a Traditional IRA with non-deductible "basis".
Yes, but keep in mind that only part of the conversion will not be taxable. TurboTax can handle that when you enter your previous non-deductible contribution from the last 8606 form filed and the total year end value of all Transitional IRA accounts.
You can NEVER withdraw ONLY the nondeductible part - it must be prorated over the entire value of ALL Traditional IRA accounts. (For tax purposed you only have ONE Traditional IRA which can be split between as many different accounts as you want, but for tax purposes they are all added together).
For example using rough figures: if you had $60K of nondeductible contributions in an IRA with a total value of $600K (10:1 ratio), then when you take a $60K distribution from any IRA account $6,000 would be nontaxable and $54,000 would be taxable (same 10:1 ratio), with the remaining $54K of basis staying in the IRA for future distributions. As long as there is any money in the IRA, there will be some basis.
This calculation is done on line 6-15 on a 8606 form when you have a distribution from a Traditional IRA with non-deductible "basis".
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