How and when does form 8606 get triggered in TurboTax (so that I can make sure the taxable amount is reported correctly)?

Forum|Forum|2 years ago
March 1, 2024
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Our income exceeds the threshold to contribute to a Roth normally, so in Jan 2023, my husband contributed $6500 to a traditional IRA and immediately converted it to a Roth IRA as a backdoor Roth as he has done for a number of years previously. However, at the end of December 2023, he was unexpectedly forced to roll over one of his 401ks to a traditional IRA (ugh), thus triggering the pro rata rule on his earlier $6500 Roth conversion.

Our understanding of the situation is that now he has a basis of $6500 in his traditional IRA from now and going forward, and that only something like 2% of his contribution is tax deductible because of how much is now in his traditional IRA after the rollover, meaning that the taxable amount of his contribution is slightly less than $6500, and that this is normally calculated on form 8606. However, after entering both 1099-Rs and going through the step by step, form 8606 is not actually triggering. No matter what I click, I either get all of the $6500 being deductible or none of it.

My question is how and when does form 8606 get triggered in TurboTax (so that I can make sure the taxable amount is reported correctly)? Also, should I be reporting this $6500 contribution as deductible or non-deductible?

Details on the 1099-Rs:
On the Backdoor Roth contribution, the only boxes that have anything in them are
1: $6500
2: $6500
2b: checked
7: 2
IRA/SEP/SIMPLE: checked
15: Has State/Payer’s state no

On the 401k rollover:
1: Amount of account rollover
2a: 0.00
7: G

TurboTax Online

Best answer by DanaB27

If you want to preform a backdoor Roth then you will have to make the traditional IRA contribution nondeductible.

To enter the nondeductible contribution to the traditional IRA:

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.
Enter your basis in the Traditional IRA from your 2022 Form 8606 line 14 (if you had a basis in the prior year)
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 Form 1099-R conversion:

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" after all Form 1099-R are entered.
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 2022 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs (this will include the pre-tax rollover amount from the 401k which will trigger the pro-rata rule)

The Backdoor Roth only works if your traditional/SEP/SIMPLE IRAs are empty. If you plan to use this strategy in the future you might want to think about a reverse rollover where you rollover IRA money to a company plan, like a 401(k). Only pre-tax funds can be rolled from an IRA to a company plan. Therefore, you would isolate the basis and could start the Backdoor Roth procedure fresh. But it only works if your employer allows it, not all plans do.

Please see Who Must File Form 8606 for additional information.

DanaB27Answer

If you want to preform a backdoor Roth then you will have to make the traditional IRA contribution nondeductible.

To enter the nondeductible contribution to the traditional IRA:

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.
Enter your basis in the Traditional IRA from your 2022 Form 8606 line 14 (if you had a basis in the prior year)
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 Form 1099-R conversion:

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" after all Form 1099-R are entered.
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 2022 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs (this will include the pre-tax rollover amount from the 401k which will trigger the pro-rata rule)