Back Door Roth impacting refund?

Forum|Forum|1 year ago
January 10, 2025
1 reply
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Last year I did a back door roth conversion. Contributed to Traditional IRA, left until settled, then did conversion. No gains to report. When I filed this on Turbo Tax, it reduced the present refund I was showing. My understanding is that this should not be the case but it ended up reducing my end refund. How do I avoid that this year?

Opus 17

Employee

By last year, you mean 2024? Not 2023?

Did you have, or do you have, pre-tax money (tax deductible money) in a traditional IRA when you did the "backdoor" Roth conversion? Pre-tax money in a traditional IRA at any time in 2024?

bcarroll0707Author

2023 taxes, filed in 2024. No balance in IRA except a few days post deposit until settled and then converted.

Opus 17

Employee

@bcarroll0707 wrote:

2023 taxes, filed in 2024. No balance in IRA except a few days post deposit until settled and then converted.

Did you report the traditional IRA contribution as tax-deductible? If so, then you took a deduction on the contribution and paid tax on the conversion. Your refund might change depending on what order you added the transactions to your return.

If you reported the IRA contribution as non-deductible, and did not have any other traditional IRA funds, then the conversion would not be taxable. However, having $7000 of unearned income might have changed your eligibility for something else. The only way to know is to go back and review your 2023 tax return, no one here can do that for you.

If you see the same thing happening in 2024, you can post here when it happens and we may be able to walk you through some troubleshooting steps. You might want to use the Desktop version installed on your own mac or PC, instead of the online version, since the desktop version allows you to directly view the forms and worksheets to see what is changing.