Question

Form 8606 with Roth Rechar to TIRA and backdoor Roth

Forum|Forum|6 years ago
April 1, 2020
2 replies
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In 2018 I contributed $5500 to a Roth. In Jan 2019 I contributed $1200 to my Roth. Early 2019 while doing my 2018 taxes TurboTax told me that my MAGI was too high to contribute to Roth. I re-characterized the $5500 (total rechar = $5,694.16 per 2019 1099-R box 7=R) to a newly created TIRA. And converted the entire TIRA to the Roth (Total converted $5,749.03 per 2019 1099-R box 7=2). The TurboTax generated Form 8606 for 2018 had $5500 on lines 1, 3, and 14.

In March 2020 while doing my 2019 taxes, TurboTax told me that my MAGI was again too high to contribute to the Roth. I re-characterized the $1200 (total rechar = $1,135.44 per letter from Fidelity) to my TIRA. I also contributed another $4800 (done in March 2020 for 2019) non-deductible straight to the TIRA. And then converted the entire TIRA (~$5935) to the Roth.

The 2019 TurboTax generated form 8606 has the following:

Line 1: 6000

Line 2: 5500

Line 3: 11500

Line 4: 4800

Line 5: 6700

Line 6 – 12 are blank

Line 13: 5749

Line 14: 5751

Lines 15a,b,c: 0

Line 16: 5749

Line 17: 5749

Line 18: 0

I was thinking that I would need to owe taxes on the gains $5749-$5500= $249. However, the 2019 TurboTax generated form 8606 line 18 says there is $0 taxable amount. Is that correct? Also, why would lines 6-12 be blank? When I fill out form 8606 with what I think should be in lines 6-12 I get the following:

Line 6: 1200

Line 7: 0

Line 8: 5749

Line 9: 6949

Line 10: .964

Line 11: 5543

Line 12: 0

Line 13: 5543

Line 14: 5957

Line 15a,b,c: 0

Line 16: 5749

Line 17: 5543

Line 18: 206

This shows some tax owed on line 18, but still seems off. Can anyone let me know what I am doing wrong or why TurboTax says no tax is owed?

Thank you.

DaveF1006

At this point you may wish to contact a specialist that can work through that section of the return with you. The specialists can look at your return on their screen to find out exactly what is causing this issue and suggest how you can take corrective action if needed.

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macuser_22

Employee

First, lines 6-12 are blank because there is probably an * next to line 15 that says the lines 6-12 calculations are done on the "Taxable IRA Distribution Worksheet) and not on the 8606 form.

Even though line 6 is not there, it appears that you failed to enter the 2019 total December 31 value of all Traditional IRA accounts that you have so the entire non-deductible basis was applied rather then pro-rating it between the conversion and remaining IRA value. Entering the year end value should fix it.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

G

GatorCOAuthor

I just noticed the * next to lines 13, 15c, and 18 and now see that TurboTax filled out the Taxable IRA Distribution Worksheet. So I guess that explains why there is nothing on 6-12 on the 8606. Line 4 of the worksheet has the $1200 that I contributed to the Roth in 2019 and recharacterized to the TIRA this year. And line 9 & 11 nontaxable portion is 5759. This gets transferred to for 8606 line 13 & 17.

So I guess the gains (5749-5500=249) from the 2019 TIRA conversion do not get taxed. Still don't understand why, but seems like I've entered the numbers correctly and TurboTax is calculating correctly.

macuser_22

Employee

If the IRA had $11,500 in non-deductible contribution in it and you only converted $5,749 then there should still be at least $5,751 in it. That amount (or more) should be on the Taxable IRA Distribution Worksheet line 4.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**