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February 19, 2021
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I put after-tax income (6K) into a traditional IRA, then converted it to the Roth IRA. Why does it seem like I am being taxed again on that 6K as additional income?

  • February 19, 2021
  • 1 reply
  • 0 views
I also made sure not to accrue any interest on the 6K when I briefly put it in a traditional IRA
Best answer by ThomasM125

When you put money into a traditional IRA as a deductible contribution, it will be taxable when you take it out, even if you are just rolling it over to a ROTH IRA. You have two options to prevent it from being taxed on your return.

 

The first is to deduct the contribution, then the taxable distribution will be offset by the deduction. The other is to make the contribution non-deductible, then the distribution will not be taxable.

 

In TurboTax, you need to first enter the contribution and then the distribution, as reported on your form 1099-R. When you do so, make sure you answer the questions accurately with respect to fund balances at the beginning and end of the year, as well as whether the contribution is non-deductible and whether the distribution is rolled over.

 

TurboTax will reflect the distribution as not being taxable if everything is entered correctly.

 

 

 

 

1 reply

February 20, 2021

When you put money into a traditional IRA as a deductible contribution, it will be taxable when you take it out, even if you are just rolling it over to a ROTH IRA. You have two options to prevent it from being taxed on your return.

 

The first is to deduct the contribution, then the taxable distribution will be offset by the deduction. The other is to make the contribution non-deductible, then the distribution will not be taxable.

 

In TurboTax, you need to first enter the contribution and then the distribution, as reported on your form 1099-R. When you do so, make sure you answer the questions accurately with respect to fund balances at the beginning and end of the year, as well as whether the contribution is non-deductible and whether the distribution is rolled over.

 

TurboTax will reflect the distribution as not being taxable if everything is entered correctly.

 

 

 

 

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