Question

Backdoor Roth IRA not calculating correctly in TurboTax Deluxe 2021

Forum|Forum|4 years ago
January 27, 2022
3 replies
0 views

Hello,

I'm trying to enter the information for a backdoor Roth IRA conversation and found many threads that reference how to enter this into TurboTax. I followed this thread to the letter, but the calculations are not done correctly.

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

There is still a taxable line item on line 4b, when it should be zero. And Schedule 1 is blank.

Any suggestions on how to correct this? I'm at a loss.

Thanks!

D

DanaB27

To clarify, you contributed to the traditional IRA in 2021 and converted the full amount to a Roth IRA in 2021. If you had any earnings before the conversion then you these would be taxable and show up on line 4b.

Please review these steps:

To enter the nondeductible contribution to the traditional IRA:

Open your return
Click “Deductions &Credits” on the top
Click "I'll choose what to work on"
Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
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 contributions 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.

To enter the 1099-R distribution/conversion:

Click "Federal Taxes" on the top and select "Wages & Income"
Click "I'll choose what to work on"
Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)"
Answer "Yes" to the question "Did You Have Any of These Types of Income?"
Click "I'll Type it Myself"
Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
Click "Continue" and enter the information from your 1099-R
Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
On the "Your 1099-R Entries" screen click "continue"
Answer "yes" to "Any nondeductible Contribution to your IRA?"
Answer the questions about the basis and value

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fanfare

Employee

Backdoor Roth only works if you start the process with an empty Traditional IRA including any other IRA accounts elsewhere.

OR

if there is an interval of time between the two steps and the IRA increases in value, there is a tax on earnings as described above.

Z

zjennings

In case anyone else is confused the same way as me, you need to complete both the "Wages and Income" and "Deductions and Credits" portion in addition to the above steps for it to show up correctly.

M

Matthew_JS

the “Choose Not to Deduct IRA Contributions” screen doesn't appear when following the steps...

A

AnnetteB6

Even though the current instructions for entering a Back Door Roth contribution are showing a step that is no longer part of the TurboTax program, the assumption is being made that your Traditional IRA contribution will be non-deductible. If you need to change that, just remove the contribution altogether.

The discrepancy between the TurboTax FAQ and the actual TurboTax program will be reported for an update.

@Matthew_JS

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M

Matthew_JS

I had multiple traditional IRAs, and the Turbo Tax program prompts need to be updated to specify which IRA the question is being asked for, in the deductions. For example, the prompts asked for my remaining balance for my traditional IRA as reported to the IRS. The question was regarding the non-deductible back door Roth IRA that was converted and has a zero balance; however, I have a second IRA with a balance and the prompt doesn’t specify, so I assumed it wanted the one with a balance. When I went back and put Zero, guessing it’s for the back door conversion, then the instruction prompt comes up properly, asking what value I want to exclude. I hope TurboTax can update the prompts to specify which IRA, when multiple exist.