How do I report Backdoor Roth, and a rollover from 401K to Traditional IRA to fidelity in TT using PRO RATA rule. Backdoor was first, and then rollover later in 2023.

Forum|Forum|2 years ago
February 8, 2024
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I received 2 10099-R from Fidelity, Backdoor and rollover amount. No balance in Traditional IRA prior to 2023.

TurboTax Online

Best answer by dmertz

Failing to show the appropriate amount as taxable usually means failure to enter into TurboTax the year-end value in traditional IRAs that needs to appear on line 6 of Form 8606 (or on Worksheet 1-1 from IRS Pub 590-B that TurboTax uses when there are also nondeductible traditional IRA contributions made for the year). Be sure to click the Continue button on the page that lists the Forms 1099-R that you have entered and TurboTax will ask you to enter the year-end value in your traditional IRAs. You'll see the taxable amount of the Roth conversion determined on Form 8606 Part I and Part II. The amount on line 18 will be include on Form 1040 line 4b.

dmertz

Employee

The relative timing of the Roth conversion and the rollover of the 401(k) to the traditional IRA is irrelevant. By not having a zero balance in traditional IRAs on December 31, 2023 you have caused the Roth conversion to be largely taxable and a substantial amount of your basis in nondeductible traditional IRA contributions to remain in your traditional IRA to be applied to future distributions. You'll have some amount basis in nondeductible traditional IRA contributions in your traditional IRAs until you have a zero balance in traditional IRAs at the end of some year. Unfortunately, rolling over a 401(k) to a traditional IRA in the same year that the individual is trying to use the backdoor Roth strategy is not an uncommon mistake.

kata123Author

Thanks for your response. I do have balance in Traditional IRA at the end of December 31 2023. I can calculate based on the remaining balance in Traditional IRA at the end of 2023 using pro rata rule, and the already taxed amount converted via backdoor Roth, my question is, what do I enter in TT to get the portion of the backdoor Roth that is taxable income? Currently it shows zero taxable income based on the answers provided to TT questions, and I know zero is not correct.