Backdoor Roth conversion showing a penalty

Forum|Forum|4 years ago
April 6, 2022
1 reply
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I converted $35,000 from my traditional IRA to a Roth. I believe have done what the instructions said, but the system says I will owe a penalty for excess contribution to a Roth.

Best answer by DanaB27

Please make sure you do not enter a Roth contribution under IRA contribution in the Deduction & Credit section. Please delete the entry:

Click on "Search" on the top right and type “IRA contributions”
Click on “Jump to IRA contributions"
Deselect “Roth IRA” and confirm the deletion of the Roth contribution.

Please follow these steps below to enter you backdoor Roth.

To enter the nondeductible contribution to the traditional IRA for 2021:

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” if you had a nondeductible contribution before this tax year.
If you had a basis in the Traditional IRA before then enter the amount.
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 made in 2021:

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?" if 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

DanaB27Answer

Please make sure you do not enter a Roth contribution under IRA contribution in the Deduction & Credit section. Please delete the entry:

Click on "Search" on the top right and type “IRA contributions”
Click on “Jump to IRA contributions"
Deselect “Roth IRA” and confirm the deletion of the Roth contribution.

Please follow these steps below to enter you backdoor Roth.

To enter the nondeductible contribution to the traditional IRA for 2021:

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” if you had a nondeductible contribution before this tax year.
If you had a basis in the Traditional IRA before then enter the amount.
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 made in 2021:

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?" if 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_d_

I am facing a similar problem in my tax returns. Even after removing the Roth IRA i see a penalty getting charged. Can you please suggest what am i doing wrong.

Regards,

Abhinav

DanaB27

To confirm you made a nondeductible Traditional IRA contribution for 2023, converted the funds in 2023, and followed the instructions above but getting a warning about an excess Roth IRA contribution?

Please make sure that you say "No" to the recharacterized question on the “Did You Change Your Mind?” screen or don't enter anything on the "Tell us how much you Transferred" screen during the traditional IRA contribution interview.

If this doesn't solve your problem it would be helpful to have a TurboTax ".tax2023" file. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online:

From the left menu select Tax Tools.
Then select Tools below Tax Tools.
A window will pop up which says Tools Center.
On this screen, select Share my file with Agent.
You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number.
Reply to this thread with your Token number and add @DanaB27. This will allow us to open a copy of your return without seeing any personal information.

The instructions for TurboTax Download:

On your menu bar at the very top, click "Online"
Select "Send Tax File to Agent"
Click "Send"
The pop-up will have a token number
Reply to this thread with your Token number and add @DanaB27. This will allow us to open a copy of your return without seeing any personal information.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@_a_d_

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