By Dr. James M. Dahle, WCI Founder
Reporting the Backdoor Roth IRA properly on Turbotax is unfortunately even more complicated than filling out Form 8606 by hand. The key to doing it right is to recognize that you report the conversion step in the Income section but your report the contribution step in the Deductions and Credits section. Since you generally do the income section first, you report the conversion before you report the contribution, even though you actually did the contribution before the conversion. At the end, you want to look at the Form(s) 8606 that Turbotax generates, just like you would check up on one filled out by an accountant.
Step 1: Reporting the IRA Conversion Step in Turbotax
Let's start at the very beginning and walk you through step by step. I'll be using Turbotax Home and Business 2019, but honestly, this hasn't changed in years and probably won't change for years. You will also probably want to use the download (desktop) version instead of the online version. If for no other reason, I find the “forms mode” to be super valuable. Also remember that this walkthrough assumes you did the Backdoor Roth IRA process “correctly” in the “normal” way, i.e., made a $6K contribution during the calendar year and did a $6K conversion immediately afterward. You'll need to make a few changes on your own if that isn't true. If you did not make your conversion correctly, you'll want to read through these posts:
How to Do a Backdoor Roth IRA Ultimate Guide
How to Fix Backdoor Roth IRA Screw-Ups
Now, let's dig in and get started.
First, you'll need to go to the personal section.
Then the income section.
In general, it's best to use Turbotax like a pro and move around it as you need to rather than going through all of their long lists of questions. If you get stuck, you can use the “guide me” option. But for now, check “I'll choose what I work on.”
Now you're on the Turbotax income menu. Scroll down to the Retirement Plans and Social Security section and click on the start button next to IRA, 401(k), Pension Plans (1099-R) line.
Vanguard sends us 1099s each year, so I'll check the box yes and hit continue.
The import feature from Turbotax is very nice, particularly for big long complicated lists of taxable account transactions. But a quick 1099 is no biggie. I can enter it faster manually than download it. I just pull out my 1099-R from Vanguard. . .
Yes, I know it's a 2020 1099. No big deal. The 2019 one looked exactly the same and so will the form for 2021. Note that there are a few cents reported in boxes 1 and 2. Feel free to round those to the nearest dollar on your taxes.
Now you just input that information into Turbotax. Click the first button on this page and hit continue.
Just transfer the information over. Box 2b deserves special attention. If Vanguard (or whoever) didn't check that box, then they had better have left box 2a blank or put a $0 in it. If not, have them correct the 1099. In general, you'll have a 2 in box 7 and the IRA box afterward should be checked too.
If you filled out the prior page right, this page should look about like this. Just hit continue.
It's not an inherited IRA, so you click the no box and continue on.
Since you didn't take the money out and buy a sailboat with it, click the first button. Since it was a Roth conversion, you click the second button in answer to the second question and hit continue.
If you are married, filing Married Filing Jointly, and your spouse is also doing a Backdoor Roth IRA, instead of hitting continue, hit “Add Another 1099-R” and go back through the previous questions to enter the information from your spouse's 1099-R.
You'll eventually come back to the same page. Now hit continue. Turbotax will ask you a few more questions.
Just hit “No, I didn't” and click continue.
Next, it asks about non-deductible contributions. Note that you'll see this question when you get to the contribution section too. Click yes and continue.
If you're doing your Backdoor Roth IRA “correctly” in the “normal” way, your basis at the end of the prior year should be $0. If yours isn't for some reason, put in your basis (i.e., non-deductible money put into the traditional IRA but not converted out of the IRA). Then hit continue.
This is an important box to get right, and it's important to make it zero too! This line goes directly to line 6 of Form 8606. If this number isn't $0, you're going to have your conversion pro-rated. Fill it in accurately, then hit continue.
Okay, you're now done with entering the conversion step into Turbotax. You're back on the Income Menu in Turbotax. If you scroll down to the Retirement Plan and Social Security section you'll see $6,000 ($12,000 if you did a Backdoor Roth IRA for your spouse too) next to the IRA, 401(k), Pension Plans (1099-R) line.
Step 2: Reporting the IRA Contribution Step in Turbotax
Now let's do the contribution step. First, let's go to the Deductions and Credits menu by clicking on Deductions and Credits at the top. Then click on “I'll choose what I want to work on.” You're now on the Deductions and Credits Menu.
Scroll down to the Retirement and Investments section and then click on the “Start” button next to the Traditional and Roth IRA Contributions Line.
It'll take you to this page.
If you're filing Single, it'll only give you one column of boxes, but if you're filing MFJ, there will be a column for you and your spouse. Click the traditional IRA boxes for each of you. Remember you're contributing to a traditional IRA, not a Roth IRA. Then hit continue.
Click no to go to the next page.
Presumably, you put in the maximum $6,000. If you're 50+, that could be $7,000 [in 2021]. Fill the box out accurately, then hit continue.
This question is asking about recharacterizations, discussed above. If you're doing your Backdoor Roth IRA correctly, you'll answer this one “no” to go to the next page.
This question is asked because Turbotax is trying to discover if your IRA contribution is deductible. There is an income limit on IRA contribution deductions if your income is above a certain amount. Just answer the question truthfully, yes or no to move on.
You'll get the same question for your spouse if any.
If you contributed too much to an IRA in the past, here's where you report that. Most will just click “no” here and move on.
Next, Turbotax will ask you the same three questions about basis and amount in the IRA at the end of the previous year that it asked at the end of the conversion section. Make sure you answer them the same way! Don't worry that they were asked twice. That's normal. Then, if married, Turbotax will take you back through all the same questions about your spouse from the “repayment of a retirement distribution” on down. Once you answer all of those, you end up here.
Two things I want you to notice on this page. First, you, as a high earner, get no IRA deduction despite contributing $6,000-$12,000 to IRAs for the year. So that is $0. Second, now that you've entered your conversion and contribution, the amount of tax due as calculated by Turbotax in the upper left (“Federal Refund $0”) hasn't changed. That shows you that you did the whole process correctly. There should be no additional tax due from contributing to an IRA indirectly via the Backdoor Roth IRA process. Hit continue and you'll go back to the Deductions and Credits menu.
Scroll down to the Retirement and Investments section and make sure that you have a $6,000 (or $12,000) on the Traditional and Roth IRA Contributions line.
If you're really neurotic, and you have the downloaded version of Turbotax, you can double-check you did it right by going to Forms Mode (button in the upper left of the screen). Once there, you can click on your Form(s) 8606 to make sure you did it right.
Now you can see Turbotax's version of Form 8606. It's okay that it looks slightly different from the official IRS form. The IRS doesn't care. Remember if you did a spousal Backdoor Roth IRA to check both 8606s. The most important lines to check are lines 15c and 18. If you did the Backdoor Roth IRA correctly, these should both be $0. If they're $1 or $5, that's okay. If it's $6,000, you entered it into Turbotax incorrectly and need to start over.
Note that Turbotax uses the “Taxable IRA Distribution Wkst (per IRS Pub. 590-B)” to fill out this form. This is a bit of a gray area as to whether to do that or to simply go down the 8606 form. If you go through the worksheet, there will be nothing on 8606 lines 6-12. Either way, no biggie, as long as lines 15c and 18 are correct. If you care, this is what that worksheet looks like:
Amazingly, it looks a whole lot like lines 5-12 of Form 8606! Turbotax also has a version of this you can look at in Forms Mode. Here's what it looks like for our example:
Incidentally, if you have screwed this up and you're not getting what you want and you just want to start over, all you need to do is delete all the applicable forms in Forms mode. The most important ones to delete are the “IRA Contrib Wks” and the “IRA Info Wks.” Just click on the form and you'll find there's a delete button at the bottom on a PC but you need to go under the Forms menu on a Mac and select “Remove [name of form].” Then you can go back to the top and follow my instructions.
Hope this was helpful.
If you have a question about the Backdoor Roth IRA and not Turbotax specifically, you should FIRST read this very in-depth Backdoor Roth IRA Tutorial before asking your question in the comments below. I promise you there is a 99% chance your question is answered there.
Any questions? Is this the process you follow on Turbotax? Why or why not? Comment below!
Dr. Dahle,
Thank you very much for your website. I have found it to be incredibly helpful. I am doing a 1040X for 2020 because I filed without an 8606. I wish I had found your website before I filed. It appears that the 8606 that I created today matches what you have the sample form you have in this article. However, it is not the same as the 8606 shown in the article below.
https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
In this article, the sample 8606 has some additional lines filled in. Specifically, lines 8-11. Do you know why the two are different?
Thanks,
Jim
Yes.
And either one is probably fine. The key is making sure the lines at the end are fine because those are the only ones that go anywhere else on your tax return.
Turbotax uses a different worksheet.There is some debate about which is the “proper” way to report it, but it works out to the same result in most situations.
As I said in the post:
Dr Dahle
Amazingly helpful information, thank you so very much.
I believe there is one slight mistake, which might seem minor but threw me off when I was trying to understand your comments about the distribution worksheet that Turbo Tax uses instead of a portion of the Part I. You wrote:
“If you go through the worksheet, there will be nothing on 8606 lines 5-12.”
however I think you meant lines 6-12 (not 5-12). In my experience of working through this (and even looking at your example), line 5 is actually filled in.
Hope this helps!
Thank you for the correction.
For the 2021 Turbo Tax Home and Business, on the “What did You Do with the Money from Vanguard Fiduciary Trust Company” step, I clicked “I moved it to another retirement account”, but it didn’t give me a check box for “I converted all of this money to a Roth IRA account.” It only gives me an option for “rolled over all of this money,” and “did a combination of rolling over, converting, or cashing out the money.” Maybe it will be added in an update?
Edit: When I clicked “Did a combination of rolling over, converting, or cashing out the money” it gave a drop down and I was able to put $6000 in the converted to Roth IRA box. I’ll see if it works out for the form in the end.
Form 8606 seems to look correct when using the “Did a combination of rolling over, converting, or cashing out the money” and entering $6000 in the “converted to Roth IRA box.” Maybe its just slightly different this year than in previous. Some of the yes/no questions were in a slightly different order as well. Hopefully this helps someone else going through this in Turbo Tax.
Thanks for the update and feedback.
I can confirm this change for TurboTax 2021. My case is also extra special since I did late contribution 2020 in 2021 and converted both in 2021 (the 12000 case). I thought I did it correctly on TurboTax until I saw an empty Part II 8606.
How did you get Part II filled out on the 8606? I am having the same problem for a late contribution. Thanks!
Can you please share how you filed your taxes in this case? I didn’t receive 8606 as well. How do I file taxes? Thanks!
8606 is a form the taxpayer fills out, not one they receive.
Thank you for tutorial, it was helpful!
Two problems: 8606 still has red ! but all numbers are correct. I also have 4852 forms generated by turbo tax, and there is a prompt in 1099_R to file 4852.
Is it a connections between these two warnings?
Sounds like a software issue. Maybe try calling the TT help line?
Turbo Tax put up their own guide now too: https://ttlc.intuit.com/community/entering-importing/help/how-do-i-enter-a-backdoor-roth-ira-conversion/00/25567
Only 11 years late. I guess better late than never.
Hi,
Do I need to have my brokerage firm update my 1099-R because it has box 2b “Taxable amount not determined” checked, but the “Total distribution” box is not checked? Box 1 and 2a are “6,000” and box 7 “Distribution Code” is “2” and the “IRA/SEP/SIMPLE” box is checked.
Thanks in advance for this guidance!
No.
I am doing my taxes for 2021. I did the backdoor conversion for both myself and my spouse. I followed the same process for both , but We got 1099-R which are slightly difference. My spouse has both options checked in box 2b. But for myself box 2b “Taxable amount not determined” is checked, but the “Total distribution” box is not checked. Is this an issue? Should i contact fidelity to get it fixed? Ideally should both boxes be checked?
I don’t think so. I think it’s fine so long as 2b is checked.
Thanks for the prompt reply. Reason I asked was because my $6K was still showing up, but I think it’s perhaps related to the “Yes, make part of my IRA contribution nondeductible” section and no the 2b “Total Distribution” box?
I figured out what my issue was. If you just enter your 1099-R form, there’s no option to add the Non-Deductible Contribution to a Traditional IRA. So, you have to follow the steps on this link (https://ttlc.intuit.com/community/entering-importing/help/how-do-i-enter-a-backdoor-roth-ira-conversion/00/25567) to a tee, particularly this part:
– search for ira contributions and select the Jump to link in the search results
Select Traditional IRA on the Traditional IRA and Roth IRA screen and Continue
Thank you so much for walking us through those steps, Jim. You made a confusing process so much easier! This is my first year doing the back door Roth and I’ll be doing it from now on thanks to you.
You’re welcome.
I was a resident and fellow in 2021 but did a backdoor Roth IRA in case a signed bonus for a job in 2022 might have pushed me over limits for direct contribution to Roth IRA. I followed your directions (both for my contribution on Vanguard as well as on TurboTax) am getting an error in TurboTax. When I review to file, I receive an error from the IRA Contributions worksheet. Line 14 has been entered as $6000 (“amount on line 13 you elect to make nondeductible”). My deductible IRA contribution was calculated at $2300 (line 12) and nondeductible contribution at $3700 (line 13). I fixed the error by changing Line 14 to $2300. This doesn’t seem to change my total refund at all, but before I file I wanted to make sure that this was the correct fix.
It’s fine to do this, you just want to make sure you’re not getting double taxed. If you got a $2300 deduction and then paid taxes on an extra $2300 in income, no big deal. So if your total tax burden is such and such the way you entered it, and then you remove all mention of IRAs and conversions from your tax return and the total is still the same, you should be good. But as far as how to deal with that specifically with Turbotax 2021, I don’t have a way to double check that without going out and buying the software which I wasn’t planning to do this year.
I find myself coming across the same error right now. My line 12 is 590, Line 13 is 5410, and 14 is 6000 (as it reads right now). If you just adjusted your line 14, did you have to go back through your contributions page and adjust the numbers, or was changing on just this step adequate?
Thank you for taking the time to put this together. It’s very helpful. This is my first time doing a backdoor Roth conversion. I made the contribution to my Traditional IRA in January 2022, converted to my Roth IRA shortly after and marked that money as my 2021 Roth IRA contribution. I also did a backdoor Roth conversion for the 2022 tax year in January 2022. The problem I’m having now is that I did not receive a 1099-R from Fidelity. I called them and they told me it’s because the contribution to the Traditional IRA was done in 2022. So does this mean I will be reporting both of my backdoor Roth conversions (for 2021 and 2022) next year on my 2022 tax return? Is this a problem at all?
No, a contribution FOR 2021 is reported on your 2021 taxes whether they send you a 1099 or not. The 1099 might just be for the conversion step, which will go on your 2022 taxes.
Ok so I report my $6,000 contribution to my traditional IRA for 2021 on my 2021 tax return, and then on my 2022 tax return I report my 2022 traditional IRA contribution, my 2022 traditional to Roth conversion, AND my 2021 traditional to Roth conversion? Did I screw up by doing the 2021 conversion in 2022?
It’s not a “2021 traditional to Roth conversion”. It’s a 2022 Roth conversion because you did it in 2022. The money is no longer tied to 2021 after you contribute it. But yea, that’s how it works.
Did you “screw up?” Not really. But you made things more complicated than it had to be.
Got it. Thanks for taking the time to answer my questions!
Thank you so much for this posting. I was so nervous about the whole Backdoor Roth Conversion from the time I pulled the trigger on it back in October. I was totally confused on Turbotax until I found your posting. You have save me a lot of money since I was able to do it on my own! Thank you again!
My pleasure.
Hmmm, I’ve run through this about a dozen times, and my turbotax 1040a still shows line 4a with $6000 in taxable income. If I change box 2 to zero, then it processes correctly, but it brings me to a screen where I have to free-text an explanation for why it’s not taxable.
I rolled over a 401k from my fellowship this year, so I have a handful of other 1099-R’s. Could this be part of the problem/?
YJK,
It’s hard to know why you are seeing that screen without knowing all of the steps. My wife and I had both a 401k rollover and a ROTH contribution in 2021 so my situation was probably similar to yours. If you want to walk through it over the phone you can contact me. 540-355-0862
Regards,
Jim
Agree that I’m not sure what’s going on. You can delete the form and start over, but I wouldn’t necessarily assume having to free text something is a bad thing, but you shouldn’t have to do that. Calling Turbotax might help, but I’d take Jim Leonard up on his kind offer!
thank you both! will probably try restarting the whole return from scratch – if its still not working, I’ll give you a call, Jim.
It was the basis!
This was a late contribution made in 2022 for the 2021 tax year – I saw some of the other comments and the link to your other article.
Maybe update this article above with a link to the late contribution article?
There’s a section in the “main” article on the Backdoor Roth all about how to deal with “late” contributions. I know this article at least links there.
Thanks for the great tutorial!
I am trying to do backdoor conversion for first time and made contributions for 2020 and 2021 that were both converted in 2021. My 1099-R says $12000, and I entered my 2021 contribution of $6000, but TurboTax says I owe taxes on the distribution in 1099-R “income”. What did I do wrong? I thought I followed the steps above but must be missing something….
Thanks!
I found the mistake, I had clicked “NO” for tracking nondeductible contributions. As usual, WCI had already answered the question and provided another helpful link:
https://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html
Thanks a ton!
Glad you figured it out!
Hey Patrick. Glad you figured it out. I’m in exactly the same situation. After I clicked “Yes” for tracking nondeductible contributions in 2020 and prior years. What should be the basis for the year 2020 ( since I contributed 6000 in 2020 but did not convert until 2021) is this still “0” or 6000. Thank you
Amit, but my understanding is that the basis for previous year refers to whether or not the IRA(s) had zero balance the previous year. Therefore, I entered $0. Hopefully WCI or other experts can chime in if this is incorrect!
Patrick
Basis is already taxed money in the IRA. So if you contribute in 2021 and then convert in 2022, you’ll have basis when you do your 2022 8606. More info here:
https://www.whitecoatinvestor.com/late-contributions-to-the-backdoor-roth-ira/
Basis is then $6000. Remember basis is money that has already been taxed.
Dear WCI.
I’m currently using Turbotax desktop version. My story is I contributed 6000$ in tax year 2020( end of year amount on my IRA is 6000) and then again in 2021 in to IRA. I converted to back door roth in 2021 ( I made sure that end of year amount was “0”). I’m MFJ but did not do spouse contribution for Roth.
As one of the comments mentioned the software did not give me an option of ” I converted all the money to Roth”. It only has 2 options whether I rolled over or did a combination of all. After I clicked on the combination, it gave a drop down and I was able to put $12000 in the converted to Roth IRA box. Immediately after this, the federal tax I owed jumped to an extra 3000$.
If it is making you pay extra tax on a conversion, it’s not right (unless somehow you were getting a deduction for the contribution).
I have the same problem with Turbo Tax. I decided to complicate it furthermore. Please don’t ask why.
I transferred the money to the traditional IRA in Dec 2021 and rolled it over to Roth in Jan 2022. When I am filling out the info with TurboTax, it just asked me when did I do the contribution; which is 2021. I paid the fees and previewed my form 8606 and it still has 6000 on lines 16 and 17 despite me doing the conversion only on Jan 2022. Please share your thoughts about it. Thank you.
Did you do a conversion in 2021 (perhaps of money that was contributed in/for 2020)? Because Turbotax thinks you did. See if you can figure out why.
I did the conversion in Jan 2022. I removed the contribution part in TT and resubmitted the whole thing again and it worked out. I also checked the preview and now only the part I of 8606 is filled. I don’t know what happened but it seems like it worked out on second attempt.
Anyway, thanks for your contribution regarding all this. I don’t think there is a better resource than WCI out there.
I noticed the same. Once you complete part 2 of the instructions shown above .. the tax will go to zero or show only what you previously owed – as you would expect.
This is my first year of doing a back-door roth. I unfortunately made the “error” of being late and contributing and converting in January 2022 for the year 2021. I followed the steps for the contribution
above but will have to do the conversion for next year’s taxes. When I check the form 8606 in TT it says line 14 or my basis is $6000. Did I make a mistake somewhere or is this correct?
No. Line 14 on 2021 8606 goes to line 2 on 2022 8606.
For 2021, I contributed $6000 between Jan1 2022 and April 18, 2022. This generates a 8606-S. Line 14 is showing $6000 and still showing I owe an extra $2k. I need to adjust the cost basis to fix this right?
Probably. That’s what lots of people screw up on their 8606. Impossible to diagnose with only 2 lines and a one sentence description though. Or maybe you really do owe $2K for something else you did, dunno.
Dear WCI,
I did a Backdoor Roth for myself and my wife for the first time in 2021. I made the non-deductible IRA contribution of $6000 in June 2021; then converted it into my Roth account 1 day later. I provided the CPA I hired with 2 copies of form 8606 (one for my wife and one for me) that I filled by hand just as shown in the tutorial. I received my tax return back from him and he had changed line 2 from 0 –> 6000 which subsequently changed the inputs of lines 3,5, and 14 (he did not fill in line 4, 6-12). Additionally he did not complete Part II (lines 16-18). I discussed this with him and he adjusted line 2 (though he didn’t seem to agree that I had 0 basis) but says that his software “wont let him fill in part 2 without incurring a tax penalty.” He seems to think I’m making something of nothing because line 4b of my 1040 still reads 0 and this is how he’s always done it for clients. Any thoughts? Thanks so much!
I wouldn’t worry too much about it so long as you don’t owe any more taxes, but it is wrong. If the IRS has a problem with it, the tax preparer will have to fix it. If not, then I guess no one cares.
At any rate, I can’t make all the tax preparers out there competent; I gave up on that long ago.
I am struggling with this backdoor Roth on turbo tax. I am filing this for my daughter and Son-in-law. My daughter’s comes out fine. My SIL’s does not. The difference is in the questions asked in the step-by-step. It asks my daughter (spouse) what her basis is in her IRA at 12/31/21. They both contributed $6,000 but transferred out $5,825 to keep the accounts open. When I do my SIL’s (taxpayer) questionnaire, it does not ask this question. Therefore it does not complete 8606 properly. I have deleted all the forms and reentered but it did not change. Also, my daughter has a Taxable IRA Distribution Worksheet but my SIL does not. I am sure there is something I am missing but I can’t figure it out. One more question, do they need to file a letter a a supporting statement explaining the conversion? Thank you. I would not have gotten this far without your help.
Consider using the downloadable version, going to forms mode, and then doing an override. Or calling Turbotax to get them to help. I can’t troubleshoot their software for you unfortunately. You already did what I would have recommended (delete and start over). I don’t know what to make of the question turbotax is asking about basis as of 12/31. I know it asks about basis and I know if there was a conversion done that the balance on 12/31 matters for Form 8606, but the basis on 12/31? I dunno what they’re using that for on your 2021 taxes.
I don’t think a supporting statement is required (I never do one), but you can always put one in if you want or are worried it may be. It’ll only take a few seconds.
I finally stumbled across my answer as to why my SIL’s and daughter’s form 8606 differed. It went all the way back to the 1099R form. I had clicked a box on the form that said to verify the distribution code. I did it on his but not hers. Hers worked. I never would have figured it out if I had clicked it on both.
Still have the question as to whether they need an explanation statement attached to the return.
I am impressed that you have time to do this as well as be a doctor. My son is a doctor and he knows little about finances. That has been my experience with other doctors I know. Kudos to you.
I did backdoor Roth IRA and conversion in 2021. My wife is planning to move to new employer and she has three Options with her 401k and since few of them impact our plan for backdoor Roth IRA for 2022, I wanted to get you feedback .
We have good chunck of money in her 401k- her options on moving to new job are are to keep the funds in current employee 401k or move them to new employers 401k- since these have limited funds, I like to get feedback on alternate options. We have an option to move funds to IRA account and have the freedom to choose funds, but can you tell us the pros and cons of this approach? I am looking for best option to have these funds invested Wisely while doing backdoor Roth IRA this year also.
The pros are more investing options and perhaps lower expenses.
The cons are if you keep doing Backdoor Roth IRAs they will get pro-rated (unless you convert it all to Roth) and in many states that money will get less asset protection from creditors. And 401(k) money is available at 55 instead of 59 1/2.
If I were you, I’d pick the best option between the old 401(k) and the new one, with a tie going to the new one for simplicity.
Thank you. My wife’s employer also allows Roth and after tax contributions in her 401k. Wondering if this is what we categorize as mega backdoor IRA? Do you have any articles to show benefits? Wondering if I can do both backdoor Roth IRA and megabackdoor Roth 401k ?
Yes, the MBDR IRA process is making after tax contributions to a 401(k) and then converting them a Roth account, whether in the 401(k) via an inservice conversion or in a Roth IRA via an inservice distribution.
Here’s the article: https://www.whitecoatinvestor.com/the-mega-backdoor-roth-ira/
Yes, you can do both a Backdoor Roth IRA and a MBDR IRA in the same year.
My university has a 401(a) plan that allows after tax contributions and rollovers into a Roth IRA.
Are these rollovers reported on turbo tax the same way as the Backdoor conversion?
Not exactly the same, no. But you probably just put your 1099Rs in as instructed.
So I followed your instructions to a T, but at the end of the deductions part it keeps saying : Income Too High To Deduct an IRA Contribution. How do I get past this?
For more context – I did the backdoor roth to contribute $6000 before tax day 2021, for a 2020 contribution and then again after tax day for a 2021 contribution. Hence I converted $12000 in 2021. I found the error on my 1040, it says for 4a, 4b that my IRA distribution is $12000, and 4b says the taxable amount is $6000. Does anyone know how to fix this?
What is line 2 of your 2021 8606? It should be $6,000 as that’s your basis carried over from your 2020 8606.
I too received the same message in TurboTax , but the numbers in tax forms Match with the information shared by WCI and tax shows as zero.
@WCI admin- kindly confirm if the message in TurboTax can be ignored if the numbers in 8606 form match the info you described above.
I would ignore it. Who cares about Turbotax warnings? I care about what they put on my tax forms.
Do you need to “get past” it? I mean, it’s a true statement no? I’d just click through.
I did that. Thank you so much
Hi Dr. Dahle,
I had a question about ‘Any nondeductible contributions to your IRA? ‘ section.
You have suggested putting in ‘Yes, I made and tracked nondeductible contributions to my IRA’.But on the website you suggested seems to be recommending the other way.
https://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html
It states that ” for a clean planned backdoor roth IRA, we can answer ‘No’ ”
I first opened up an IRA account in July of 2021 and did a straightforward back door Roth conversion at that time (contribution of $6000 to a traditional IRA and transferred it to a roth several days later. Did for myself and spouse so $12,000 in total)I also contributed $12,000 early Jan 2022 and did a back door roth IRA conversion right away.
Since my backdoor roth IRA was a clean conversion in the same year, should I answer ‘No’?Or should I click ‘Yes, I made and tracked nondeductible contributions to my IRA’? I guess I am having a hard time understanding what the question means. Is it asking if I made contributions to my traditional IRA, even though it was converted to a Roth? Thank you.
-B
Dr. Dahle,
Can I ask you one more question?
-When I came to the State Tax filing section (it imported all the federal tax info):
MA (I live in Massachusetts) Income and Deductions summary.
Taxable IRA/Keogh/Roth distribution: $12,000
Doesn’t distribution mean, withdrawing money from the account? I am wondering why it isn’t showing as $0. Thank you so much.
-B
Sometimes a conversion is considered a distribution, but it shouldn’t be a taxable one if the basis is equal to the amount converted. Something seems off. Are they charging you state tax on your conversion?
I have no idea why Harry Sit is recommending you lie to Turbotax. You’d have to ask him. If someone asked me if I made non-deductible contributions to my IRA this year I’d just tell the truth. So far, that has always worked out well for me on my taxes.
Yes, I think it’s asking if you made non-deductible traditional IRA contributions.
You can try it both ways and see how it affects what Turbotax puts on the tax forms. Maybe it doesn’t make a difference.
Thank you for that answer!
I had an additional question about scheduled K1 as an LP from a real estate syndication.
1) Do you have to answer “all of my investment in this activity is at risk” even if it is not checked off on the K1? I have received a few distributions (only invested for about 1 year) My losses do not exceed my investment, so I thought I would still say they are at risk?
2) If I received a 2020 schedule K1 from this syndication last year with net losses, do I select “I have passive activity losses carried over from last year” and then enter the losses from the 2020 K1 for 2021 taxes? I thought they were automatically carried over, but turbotax is still asking.
Thanks again,
Amar Dave
Yes, your investment is at risk.
I would expect them to be carried over, but I’d double check to make sure they were!
Hi, I messed up my ROTH CONVERSION for 2020 🙁 I contributed $500/month to Roth IRA in 2020 and found out my income was over the limit at the end of Dec 2020 (I get paid hourly , don’t know exact my income every year ). In March 2021, the contribution in Roth IRA was recharacterized to traditional IRA then converted to Roth IRA . In Jan 2022, I received 1099R of traditional IRA stating (Gross Contribution: $7,808.13, Taxable amount: $7,808.13, checked “taxable amount not determined”, Distribution Code:2) and 1099R of ROTH IRA stating (Gross amount: $7,439.16, Taxable amount: $0.00, Distribution Code: R). I’ve been trying to fill out 8606 but I lost. Can you help me??? Thank you.
Read this and if you still have questions ask them at the link:
https://www.whitecoatinvestor.com/ira-recharacterizations/
I read it but it is still not clear to me.
Start at line 1 of the 8606 and work your way down it. What line is confusing to you? I don’t have enough information to do your 2021 8606, but your 2020 one (assuming that was your first year) will look like this:
1 6000
2 0
3 6000
14 6000
15c 0
16 0
17 0
18 0
Thank you so much for an advice on 8606 of 2020. How about recharacterization and Roth conversion in 2021 for 2020 Roth IRA contributions($6000) which you clarify on the 8606 form above. I found out that I had some gains at the time I did recharacterization&Roth conversion in March 2021. 1099R I received in 2022 below ;
Trad. IRA ( gross contributions $7808.13, taxable amount $7808.13, checked on “taxable amount not determined”, IRS code 2)
Roth IRA ( total gross $7439.16, taxable amount $0, IRS code R)
These 1099R which I get confused and not sure if I owe taxes? If yes, how much ?
You would enter $7808 on any line asking about Roth conversions. Plus any amount you may have converted from any other conversion done in 2021. You’ll owe taxes on $1808. Line 2 will now be $6000 as your basis carried over from 2020.
Hi,
I’m on Turbotax section ” Enter Excess Amount– This amount should be the total excess contributions made to a traditional IRA as of the date your 2020 tax return was filed”…. I made the mistake of contributing $6,009. Do I just put $9 for the excess contribution or have to use the IRS formula to calculate and file an amended return?
You’ve got to pull out that $9. But yes, the excess contribution is $9.
Thank you for your quick and simple response!!!!! I spent hours searching Google and Turbotax, calling Turbotax and got either really complex info or no info at all. Thank you again!!!
I forgot to mention that I converted $6,009 into a back door Roth. How do I pull out the extra $9 and is there any extra form /steps I need to fill out ? Thanks again.
Yes, contact the IRA holder to pull the $9 out.
Did anyone did backdoor contribution in 2022 for the previous year (2021)?
I have issue where TurboTax treats my contributions as taxable while I think they should not be taxable.
I noticed that if I say that my contribution was done in 2021 then it is treated correctly as non-taxable.
However when say that I made a contribution this year (between January 1st and April 18th 2022) then my contribution is treated as taxable – which I think is wrong.
https://www.whitecoatinvestor.com/late-contributions-to-the-backdoor-roth-ira/
Wow! Things have changed since the last time I was here. A few years ago, there was a mistake on an article, which can happen to anyone, I pointed it out for the benefit of the community, similar to what the author of post #2 did, and Dr. Dahle or his moderator corrected the mistake and replied that there was no mistake. That is the reason I stopped visiting this website. Now, years later, I came back because I was doing my taxes using Turbotax and needed help with form 8606.
That’s interesting. While I certainly try to correct mistakes that are pointed out, I usually thank the person for pointing them out, rather than arguing there was no mistake. Not sure what happened back in the day. Welcome back though.
Hello,
Thank you for this post – it was incredibly helpful! I had already filed my taxes when I realized I missed the 1099-R. I’m trying to amend via turbotax and I followed your instructions to a T. I made a clean backdoor Roth conversion for 2021 (contributed in 2021 to an IRA and moved the funds to a Roth a few days later). My federal taxes are fine, no additional taxes owed or refunded, but my PA taxes are off. It’s now showing I owe additional taxes. I’m using the web version unfortunately… any ideas on how to make this right?
Thanks!
Mariana
No, I’ve never filed PA taxes via Turbotax. Maybe compare the two forms line by line to see where the difference is?
Thanks! It was purely user error, I hadn’t gone through all the forms for the state. Once I did, I was able to note that my contributions were already post-tax.