Turbotax Desktop Not Reducing Traditional IRA Basis on 8606 Despite Backdoor Roth Conversion?

[odysseus1001]

I'm perplexed by how Turbotax Desktop is reporting the basis in a Traditional IRA on Form 8606 despite a backdoor Roth conversion.

It's a standard backdoor Roth.  We made a $7,000 non-deductible contribution and then rolled that into a Roth.  Turbotax Desktop recognizes that the contribution was not deductible.  We've entered the 1099-R from Fidelity reflecting the conversion, and Turbotax properly recognizes that the conversion was not taxable (because it's after-tax and already being taxed as income).  .

*HOWEVER* my confusion comes with how TurboTax is handling the basis for the traditional IRA on Form 8606.  It takes the $7,000 contribution amount on line 1 and adds it to the existing basis on line 2, for a new total that is $7,000 higher than it was before.  That part seems right to me.

But Line 8 is *supposed* to have an entry for the "net amount you converted from traditional, traditional SEP, and traditional SIMPLE IRAs to Roth, ROTH SEP, or Roth Simple IRAs in 2024.  If you click the box on Line 8, it just opens up the list of 1099-R forms.  However, we've already entered the 1099-R reflecting the conversion, and I can't figure out what we would do with an additional 1099-R.  I've tried an override on Line 8, and Turbotax doesn't do anything with that information (which is supposed to be carried through to Line 9 and Line 16).  Am I missing something?  I've searched the forums and haven't seen anything about this.

[DanaB27]

To clarify, did you have a basis on your 2023 Form 8606 line 14? If yes, then this will be carried over to line 2 of the 2024 Form 8606. 

If you do not have a basis from the prior year then please delete the entry:

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. On the "Review your 1099-R info" screen click "Continue"
4. Answer "Yes" to "Any nondeductible Contributions to your IRA?" 
5. On the "Let's find your basis" screen delete the entry for "Total Basis of December 31, 2023"

Do you have a * next to line 13/14 of Form 8606? If yes, TurboTax is using the  Worksheet from Pub590-B and line 6 to 12 on Form 8606 will be blank (IRS).

[dmertz]

Did you fail to mark the IRA/SEP/SIMPLE box on TurboTax's 1099-R form in agreement with the Form 1099-R provided by the payer?

Did you indicate that the amount was a rollover rather than a Roth conversion?

[odysseus1001]

Hi, Dana.

Yes, there is a basis on my 2023 form 8606 Line 14 and yes, it was carried over into Line 2.   Turbotax added line 1 (the new contribution) and Line 2 (the old basis).  However, it then failed to enter anything in Line 8 to reflect the fact that there was a Roth Conversion and the basis should be reduced by that amount.

There is no * in line 13.  Line 13 is empty.  (There is an x in Line 10, which I don't understand either, but I figured that was relating to the math supposedly done on Line 10).

Any further thoughts?  Thanks!

[odysseus1001]

Hi, Dmertz.

The IRA/SEP/SIMPLE box in Line 7 of the 1099-R is checked (like it is on the 1099-R from Fidelity) and distribution code 2 is entered (as it is on the 1099-R from Fidelity).

And in answering the questions as we went through the interview, we did identify it as a rollover and not a recharacterization.

[dmertz · Accepted solution]

Reporting it as a rollover causes TurboTax to exclude it from Form 8606.  It must be reported as a conversion, not a rollover (even though a conversion is a special type of rollover).  In TurboTax you'll indicate that it was moved to another retirement account, that you did a combination of rolling over, converting and cashing out, then indicate the amount converted.

[odysseus1001]

Hi, dmerz.  Thanks for the quick response and the clarification!

I see the distinction you are making.  We were listing it as a roll-over not as a conversion, so we've changed that.  That fixed the problem!

M.