Form 8606 for Rollover IRA Roth Conversion

Forum|Forum|1 year ago
February 18, 2025
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With apologies for a lengthy question - asking for help.

I have a traditional non-deductible IRA, to which I contribute regularly. I receive Form 5498 for this IRA every year; I haven’t yet received this form for Tax Year 2024 (it will not be sent until May 2025), but I know the IRA value at the end of 2024 and the cost basis (essentially, the totality of my contributions – none of them were ever deducted due to high income).

I also have a Rollover IRA which exists for the sole purpose of rolling over my 401(k) plans when I change jobs. In 2024, I rolled over some of my 401(k) into this Rollover IRA (direct rollover, not a taxable event). I have NEVER received a Form 5498 for this account, but I know its end of year value, and assume that its cost basis is $0 since it has only rollover finds + reinvested dividends.

In 2024 I created a Roth IRA account and converted some of the Rollover IRA to Roth. Now I’m working on Form 8606 in TurboTax, and am not sure how to answer several questions:

It asks me what is my IRA cost basis. Should I enter $0 (which I think is the cost basis of the Rollover IRA), or should enter the aggregate of cost basis of the Traditional IRA and Rollover IRA? Am I correct that the cost basis of a Rollover IRA is $0 assuming no other contributions were made – just direct rollovers from 401(k) plans and reinvestments of dividends?
It asks me what is the end of year value of the IRA account. Should I enter the value of just the Rollover IRA, or aggregate value of both IRA accounts?
How do I make TurboTax aware that I have two IRA accounts? All these years I was receiving just one Form 5498 (for Traditional IRA) and this is what I was entering in TurboTax in Deductions section.

Thank you very much for your help!

Best answer by ThomasM125

If you have non-deductible contributions to IRA's in prior years, then you have to enter the aggregate balances of your IRA accounts as requested in TurboTax. One reason for this is so that your Form 8606 is populated properly and to insure the correct treatment of your rollover contributions to the Roth IRA.

You need to enter the non-deductible IRA contribution in the IRA entry screens in the Deductions and Credits section.

You would combine the entries on your Forms 5498 to account for having more that one IRA.

To view your form 1040 and schedule 1 to 3:

Choose Tax Tools from your left menu bar in TurboTax Online
Choose Tools
Choose View Tax Summary
See the Preview my 1040 option in the left menu bar and click on it
Choose the Back option in the left menu bar when you are done

[Edited 2/19/25 at 1:52 PM PST]

@GVZ

ThomasM125Answer

You need to enter the non-deductible IRA contribution in the IRA entry screens in the Deductions and Credits section.

You would combine the entries on your Forms 5498 to account for having more that one IRA.

To view your form 1040 and schedule 1 to 3:

Choose Tax Tools from your left menu bar in TurboTax Online
Choose Tools
Choose View Tax Summary
See the Preview my 1040 option in the left menu bar and click on it
Choose the Back option in the left menu bar when you are done

[Edited 2/19/25 at 1:52 PM PST]

@GVZ

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GVZAuthor

Thanks @ThomasM125 !

Just to make sure I understand correctly:

1) in TurboTax, in the Income section, when I describe the Roth conversion from the Rollover IRA, I specify

- the cost basis of the IRA as $0 because I did not make any contributions to this IRA other than rollovers. The contributions that I made to a different (non-deductible) IRA are not relevant for the Roth conversion event and should not be taken into account.

- the end of year value is the value of this Rollover IRA only; the value of the other IRA account is not relevant for the or the Roth conversion event and should not be taken into account.

2) In the Deductions section, where I describe non-deductible contributions, the cost basis is the total of all cost basis values of all traditional IRAs (i.e., $0 for the Rollover IRA + $XXX for the non-deductible IRA; the Roth IRA should not be included) and the year end value is the total of all traditional IRAs (i.e., $NNN for the Rollover IRA + $MMM for the non-deductible IRA; the Roth IRA should not be included).

Thanks again for your help - much appreciated!

DanaB27

1) No, when TurboTax asked about your basis, after you entered all your Form 1099-Rs, you will enter the aggregated basis from your traditional IRA and the rollover traditional IRA. The IRS see all traditional IRA's as one account for Form 8606 (exception if you have an inherited IRA, then you need a separate Form 8606).

No, you must enter the value of all your traditional, SEP, and SIMPLE IRAs on December 31, 2024, in the retirement section. Therefore, you need to add the value of the traditional IRA and rollover IRA together. You can see them on your end of the year statement.

2) Yes, the basis in the Deduction section is the total of all cost basis of all traditional IRAs (i.e., $0 for the Rollover IRA + $XXX for the non-deductible IRA; the Roth IRA should not be included). This basis question and the retirement basis question are the same.

Note, the end year value question during the IRA contribution interview is different from the value question in the retirement section. In the IRA contribution section the value question only comes up when you have an excess contribution. TurboTax will asked on this screen to enter the value of the traditional IRA on December 31, 2024, including contribution made in 2025 for 2024. TurboTax uses this value to calculate the penalty on Form 5329.

@GVZ

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