Question

2020 Roth IRA Backdoor Conversion Being Treated as Taxable

Forum|Forum|4 years ago
April 11, 2022
1 reply
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My husband and I are filing jointly for 2021 taxes.

In 2021, we both contributed to a traditional IRA and converted it to a Roth IRA. Here are the details

Mine

Contributed 6000 for year 2020 on 3/15/2021, converted to Roth on 7/08/2021

Contributed 6000 for year 2021 on 8/26/2021, converted to Roth on 9/20/2021

Husband

Contributed 6000 for year 2020 on 2/15/2021, converted to Roth on 3/08/2021

Contributed 6000 for year 2021 on 3/05/2021, converted to Roth the same day.

Both of our Forms 1099-R report $12,000 in Box 1 and 2a.

We followed the steps to report the backdoor Roth IRA conversion here & it is not considering our 2021 contributions as taxable, which is good.

https://ttlc.intuit.com/community/entering-importing/help/how-do-i-enter-a-backdoor-roth-ira-conversion/00/25567

The issue however is that TurboTax is still considering the $6,000 each or $12,000 total that we contributed for 2020 as taxable income. This is not correct.

I understand we need to separately file a Form 8606 for our 2020 IRA contributions, but how do we ensure that this 12,000 is not considered as taxable income for 2021?

Not A Product Question

D

DanaB27

Yes, you will have to enter your contribution for 2020 on your 2020 tax return and TurboTax will create Form 8606 for each of you to report a basis of $6,000 on line 14. This will have to be entered during the interview (either during the IRA contribution interview steps 8 and 9 or in the retirement section steps 6 and 7).

To enter the nondeductible contribution to the traditional IRA:

Login to your TurboTax Account
Click on "Search" on the top right and type “IRA contributions”
Click on “Jump to IRA contributions"
Select “traditional IRA”
Answer “No” to “Is This a Repayment of a Retirement Distribution?”
Enter the amount you contributed
Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” since you had a nondeductible contribution before this tax year.
Enter the $6,000 basis in the Traditional IRA from your 2020 Form 8606 line 14.
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).

To enter the 1099-R conversion:

Click on "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Click "Continue" and enter the information from your 1099-R
Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
On the "Review your 1099-R info" screen click "continue"
Answer "yes" to "Any nondeductible Contributions to your IRA?" since you had any nondeductible contributions in prior years.
Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

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A

aarora94Author

Thank you, Dana!

We are following the steps to enter the nondeductible contribution to the traditional IRA. We got to the question "Tell Us the Value of All Your Traditional IRA Accounts". What will be the entry here?

We haven't received a Form 5498 yet for 2021. We have one for 2020.