Updated on January 16, 2023, with updated screenshots from H&R Block software for 2022 tax filing. If you use other tax software, see:
If you did a Backdoor Roth, which involves making a non-deductible contribution to a Traditional IRA and then converting from the Traditional IRA to a Roth IRA, you need to report both the contribution and the conversion in the tax software. For more information on Backdoor Roth, please read Backdoor Roth: A Complete How-To and Make Backdoor Roth Easy On Your Tax Return.
What To Report
You report on the tax return your contribution to a traditional IRA *for* that year, and you report your conversion to Roth *during* that year.
For example, when you are doing your tax return for year X, you report the contribution you made *for* year X, whether you actually did it in year X or in the following year between January 1 and April 15. You also report your converting to Roth *during* year X, whether the money was contributed for year X, the year before, or any previous years.
Therefore a contribution made during the following year for year X goes on the tax return for year X. A conversion done during year Y after you made a contribution for year X goes on the tax return for year Y.
You do yourself a big favor and avoid a lot of confusion by doing your contribution for the current year and finishing your conversion during the same year. I called this a “planned” Backdoor Roth — you’re doing it deliberately.
Don’t wait until the following year to contribute for the previous year. Contribute for year X in year X and convert it during year X. Contribute for year Y in year Y and convert it during year Y. This way everything is clean and neat.
If you are already off by one year, catch up. Contribute for both the previous year and the current year, then convert the sum during the same year. See Make Backdoor Roth Easy On Your Tax Return.
Use H&R Block Download Software
The screenshots below are taken from H&R Block Deluxe downloaded software. The downloaded software is way better than online software. If you haven’t paid for your H&R Block Online filing yet, consider buying H&R Block download software from Amazon, Walmart, Newegg, and many other places. If you’re already too far in entering your data into H&R Block Online, make this your last year of using H&R Block Online. Switch over to H&R Block download software next year.
Here’s the scenario we’ll use as an example:
You contributed $6,000 to a traditional IRA in 2022 for 2022. Your income is too high to claim a deduction for the contribution. By the time you converted it to Roth IRA, also in 2022, the value grew to $6,200. You have no other traditional, SEP, or SIMPLE IRA after you converted your traditional IRA to Roth. You did not roll over any pre-tax money from a retirement plan to a traditional IRA after you completed the conversion.
If your scenario is different, you’ll have to make some adjustments to the screens shown here.
Before we start, suppose this is what H&R Block software shows:
We will compare the results after we enter the Backdoor Roth.
Convert Traditional IRA to Roth
Income comes before deductions on the tax form. Tax software also organizes this way. Even though you contributed before you converted, the software makes you enter the income first.
Enter 1099-R
When you convert the Traditional IRA to Roth, you receive a 1099-R for that year. Complete this section only if you converted *during* the year for which you are doing the tax return. If you only contributed for the year in question but didn’t convert until the following year, skip all the way to the next section Non-Deductible Contribution to Traditional IRA.
In this example, we assume by the time you converted, the money in the Traditional IRA had grown from $6,000 to $6,200.
Click on Federal -> Income. Scroll down and find IRA and Pension Income (Form 1099-R). Click on “Go To.”
Click on Import 1099-R if you’d like. I show manual entries with “Enter Manually” here.
Just a regular 1099-R.
If you imported your 1099-R, double-check to make sure the import exactly matches the copy you received. If you enter your 1099-R manually, be sure to enter everything on the form exactly. Box 1 shows the amount converted to Roth IRA. It’s normal to have the same amount as the taxable amount in Box 2a when Box 2b is checked saying “taxable amount not determined.” Pay attention to the distribution code in Box 7. My 1099-R has code 2.
My 1099-R had the IRA/SEP/SIMPLE box checked.
Did not inherit.
Converted to Roth
This is a very important question. Read carefully. Answer No, because you converted, not rolled over.
Now answer Yes, you converted.
We converted all of it in our example.
Answer Yes because you made a nondeductible contribution to a traditional IRA.
The refund in progress drops a lot at this point. We went from a $2,434 refund to $946. Don’t panic. It’s normal and only temporary. It will come back up after we complete the section for IRA contributions.
You are done with one 1099-R. Repeat the above if you have another 1099-R. If you’re married and both of you did a Backdoor Roth, pay attention to whose 1099-R it is when you enter the second one. You’ll have problems if you assign both 1099-R’s to the same person when they belong to each spouse. Click on Finished when you are done with all the 1099-Rs.
Additional Questions
A few more questions.
Answer Yes because you contributed to a Traditional IRA for the year.
We will wait.
Non-Deductible Contribution to Traditional IRA
Now we enter the non-deductible contribution to the Traditional IRA *for* the year in question. Complete this part whether you contributed in the same year or you did it or are planning to do it in the following year between January 1 and April 15.
If your contribution during the year in question was for the previous year, make sure you entered it on your previous tax return. If not, fix your previous return first.
IRA Contribution
Click on Federal -> Adjustments. Find IRA Contributions. Click on “Go To.”
Wrong tense but answer “Yes” because you contributed to an IRA for the year in question.
Check the box for Traditional IRA if you contributed directly to a Traditional IRA. If you originally contributed to a Roth IRA and then you recharacterized the contributions as traditional contributions, check the Roth IRA boxes here and then answer yes when it asks you whether you recharacterized.
You know you don’t get a deduction due to income. Enter anyway.
Enter your contribution amount. We contributed $6,000 in our example.
Conversion Isn’t Recharacterization
This is important. Answer No if you contributed to a Traditional IRA and converted to Roth. Answer Yes if you originally contributed to a Roth IRA, recharacterized it to Traditional, and then converted.
Basis From Previous Year
If you did a clean “planned” backdoor Roth and you started fresh each year, enter zero. If you contributed non-deductible for previous years (regardless of when), enter the number on line 14 of your Form 8606 from last year.
Pro-Rata Rule
This is another important question. If you are doing it the easy way as in our example, technically you can answer Yes and skip some questions. The safer bet is to answer No and go through the follow-up questions. If you’ve been going through these screens back and forth, you may have put in some incorrect answers in a previous round. You will have a chance to review and correct those answers only if you answer No.
In a clean planned backdoor Roth, you contribute for year X during year X. Leave the boxes blank. If you didn’t know better and you contributed for the previous year after January 1, enter the amount in the first box. If you already did it the hard way for the previous year, please, please, please do yourself a big favor and do it the easy way this year. See Make Backdoor Roth Easy On Your Tax Return.
The box should be blank when you do a clean planned backdoor Roth. If you have other Traditional, SEP, or SIMPLE IRAs, add up the balances from your year-end statements and put the value here. The software will apply the pro-rata rule.
That’s great. We’re expecting it.
A summary of your contributions. 0 in Traditional IRA deduction means it’s nondeductible. Click on Next. Repeat for your spouse if both of you did a Backdoor Roth.
We are done entering the non-deductible contribution to the Traditional IRA. Now the refund in progress should go back up. It was a refund of $2,434 when we first started. Now it’s a refund of $2,396. The difference of $38 is due to the tax on the extra $200 earned before the Roth conversion.
If you only contributed *for* last year but you didn’t convert until the following year, remember to come back next year to finish the conversion part.
Taxable Income from Backdoor Roth
After going through all these, let’s confirm how you’re taxed on the Backdoor Roth.
Click on Forms on the top and open Form 1040 and Schedules 1-3. Click on Hide Mini WS. Scroll down to lines 4a and 4b.
It shows $6,200 in IRA distributions, $198 of which is taxable. The taxable income came out to $198, not $200, due to some rounding in the calculation. If you are married filing jointly and both of you did a backdoor Roth, the numbers here will show double.
Tah-Dah! You got money into a Roth IRA through the backdoor when you aren’t eligible to contribute to it directly. You will pay tax on a small amount in earnings if you waited between contributions and conversion. That’s negligible relative to the benefit of having tax-free growth on your contributions for many years.
Troubleshooting
If you followed the steps and you are not getting the expected results, here are a few things to check.
Fresh Start
It’s best to follow the steps fresh in one pass. If you already went back and forth with different answers before you found this guide, some of your previous answers may be stuck somewhere you no longer see. You can delete them and start over.
Click on Forms and delete IRA Contributions Worksheet, 1099-R Worksheet, and Form 8606. Then start over by following the steps here.
Covered by Retirement Plan
Make sure the “Retirement plan” box in Box 13 of the W-2 you entered into the software matches your actual W-2. If you are married and both of you have a W-2, make sure your entries for both W-2’s match the actual forms you received.
When you are not covered by a retirement plan at work, such as a 401k or 403b plan, your Traditional IRA contribution may be deductible, which also makes your Roth conversion taxable.
Self vs Spouse
If you are married, make sure you don’t have the 1099-R and the IRA contribution mixed up between yourself and your spouse. If you inadvertently assigned two 1099-Rs to one person instead of one for you and one for your spouse, the second 1099-R will not match up with a Traditional IRA contribution made by a spouse. If you entered a 1099-R for both yourself and your spouse but you only entered one Traditional IRA contribution, you will be taxed on one 1099-R.
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FinancialDave says
I am absolutely a TurboTax defector for just the reasons you state and saved me TWO upgrades in the process and saved almost $100. I therefore appreciate any articles on using H&R Block effectively and will pass them along.
Thanks,
Dave
Moni says
I have a question about filling “Total IRA Basis” in your instructions and will appreciate any feedback.
Is “Basis” to be used when I am converting IRA contributions from prior years? Will it only contain the amount that has not yet been converted but was reported in 8606 in prior years. E.g. if I have converted IRA contributions from 2013 and 2014 in 2014. So it looks like I’ll use basis to enter my 2013 contributions from 8606. But if I had already converted my IRA contributions from 2013 in 2013 itself, basis will be 0 even though I’ll have 8606 for non-deductible contributions made in 2013.
Thanks
Harry Sit says
If you contributed non-deductible for previous years (regardless when), enter the number on line 14 of your Form 8606 from last year. Assuming you did it correctly for 2013, if you only contributed non-deductible for 2013 but you didn’t convert in 2013, your 2013 Form 8606 shows the basis on line 14. Enter that number. If you contributed for 2013 and you converted it all in 2013, your 2013 Form 8606 had zero or blank on line 14.
Moni says
By the way, thanks for the great post.
Just a week ago I ran into your similar post about Turbo Tax and desperately was looking for same information using H&R Block software. That’s when I subscribed to your blog and got a pleasant surprise today when this post showed up.
ad says
I would love if you could give a walk through of how to do this in TaxAct. I’ve been using it for a while and am used to it, but would like to see how to properly file this.
Steven says
Oh wow, you are such a gem for publishing this. Thank you so much!!!
PARDEEP KUMAR says
Thanks..This is amazing, I did a silly mistake while doing it myself and couldn’t figure it out, searched online and there is this wonderful article with step by step instructions. Thanks 🙂
Peter says
Hi Harry,
Are the steps in the beginning of this (before entering the non-deductible contribution) the same steps needed to report a traditional 401(k) to Roth 401(k) conversion?
Thanks for all you do.
Harry Sit says
Only the starting point is the same. The boxes checked or unchecked and the Box 7 code on the 1099-R are different, which bring up different screens after that.
Ashley says
I would greatly appreciate any assistance you could provide for how to handle the following situation using H&R Block: 1) My wife and I each contributed $4500 to a Roth IRA in 2014/2015. 2) My wife and I realized our income was too high in 2014. 3) My wife and I opened a Traditional IRA and recharacterized our $4500 Roth IRA contributions (plus their earnings) as a Traditional IRA. 4) My wife and I then converted these Traditional IRAs to Roth IRAs a couple days later (the so-called “back door Roth IRA”. Thanks!
kp says
Ashley – we are facing the same situation as you but noticed no one responded. Can you please help us? Did you ever figure out a solution?
Travis says
I’m trying to do this in the HR Block web version of their software. I imported my 1099-R. The 1099-R lists the taxable amount in box 2a as the full amount of the withdrawal. When I go through the interview questions associated with this event in the software, it asks me if I converted the withdrawal to a Roth. I answered yes. Then, it later it gives me an error saying that the taxable amount must be zero since I converted to a Roth. Am I supposed to just override what is written on my 1099-R and put 0 instead? Does the 1099-R get filed with the IRS? If so, does my entry have to match what is written on the form. Any advise is appreciated.
Harry Sit says
Someone else also brought it up. Please report it to HRB support as a bug in HRB Online. Until they fix it, just delete the entry in box 2a (don’t put in zero). That will let you move on. The check mark in box 2b makes the number in box 2a not as important.
I don’t know what goes into e-file. The paper Form 1040 asks for 1099-R only if tax was withheld. The IRS has 1099-R from the issuer already. It’s best to match your entries to the form as you received, but what can you do if the software doesn’t let you continue?
Mike says
I need form 8606 because I made a $6500 non deductible contribution to a traditional IRA in 2014, then roll it into a Roth in 2014. H&R block skips part 1 and jumps right to Part II because it is checking the box right under the Part I heading, whereas the IRS instructions clearly state that I need to fill out part I. Why are embedded instructions in H&R Block form 8606 different than embedded instructions in IRS form 8606 ? Moreover, if I look at the H&R block worksheet that feeds into form 8606, there is a box in the worksheet that has $6500 and says that it is going to go to form 8606 part 1, line 1, which is where I expect it to go. Anyone else notice this or have an explanation ?
Harry Sit says
It’s reading the 3rd bullet under the Part I instructions as saying Part I is not needed if you converted all and the first bullet as saying complete Part I only if you contributed but did not convert. If you fill out Part I it just takes you through a series of circular calculations — divide by a number and then multiply back. You end up with some zeros and the full converted amount anyway.
Roger says
I’m having the same issues with H&R block, It’s saying I don’t need to complete Part I since I converted all of my non-deductible contributions. Is there any way to override that? It’s clear from the instructions that I DO need to complete Part I. I understand that I get to the same place in terms of taxable amount ($0), but I’d still like to complete the form properly.
Thanks for the great post! I couldn’t for the life of me get H&R Block to work before I read this post.
Harry Sit says
Roger – I don’t worry about it. I believe H&R Block’s interpretation is acceptable. If you’d like you can try answering No to that “Did you convert all …” question.
Roger says
OK, thanks for the reply.
Mike says
3 bullets from IRS version of 8606 shown below. Not sure why IRS would not have been more explicit if I go by your interpretation, or why H&R Block could not have been clear on the discrepancy so that people like me would not question the H&R Block apparent deviation from the IRS instructions. If I override the checkbox, part 1 will be filled out. I do agree that overriding the checkbox in H&R Block or sticking with it checked results in the same final taxes. However, I wonder if skipping part 1 negates the goal of informing the IRS that you made a non deductible contribution in 2014.
• You made nondeductible contributions to a traditional IRA for 2014.
• You took distributions from a traditional, SEP, or SIMPLE IRA in 2014 and you made nondeductible contributions to a traditional IRA in 2014 or an earlier year. For this purpose, a distribution does not include a rollover, one-time distribution to fund an HSA, conversion, recharacterization, or return of certain contributions.
• You converted part, but not all, of your traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2014 (excluding any portion you recharacterized) and you made nondeductible contributions to a traditional IRA in 2014 or an earlier year.
Mike says
I keep hearing words like H&R Block interpretation is OK for its behavior with not filling out part 1, but I think a simpler explanation is that it is a bug. I went the route of online support. I don’t think the agent knew there was a form 8606. Agent took my info anyway. Someone called me a few days later. You would think they would have had the appropriate person call me. This agent didn’t seem to understand either. Did not know how to compare IRS part 1 instructions to HR Block part 1 instructions and see that they are different. Agent told me that I would receive a survey and requested that I document the issue in the survey. Wasn’t that her job ? Anyway, I did explain things again in the survey and never heard back.
Harry Sit says
It could be. I also got tired of defending them. I will replace my examples elsewhere with a form produced by TaxACT, which looks more normal.
Naomi says
Thank you for this website. I did my taxes on H&R online with the best of both where a CPA reviews it. When I entered the amount my husband and I put into our traditional IRA ($5500 each), the next page shows our non-deductible contribution as $0 and cannot be edited. When I go through the rest of the conversion questions, the Roth-contribution is penalized as an excess contribution to Roth-IRA over the income limits and also adds $11K to our income. Is this a bug in the system or did I screw something up?
Harry Sit says
You screwed something up. Make sure you answer ‘No’ to whether you recharacterized your contribution to Roth, if you converted, not recharacterized. See Traditional and Roth IRA: Recharacterize vs Convert.
Greg says
I’m having the exact same problem with the H&R Block software, and the issue is not a mistake of clicking “recharacterize.” Naomi, were you able to get any help with this from H&R Block? I’ve been on the phone with a customer service rep for a half hour and it doesn’t seem like she has any clue!
Harry Sit says
I just tried H&R Block online with a test account. Except it didn’t like a number in 1099-R box 2a, I had no problems. Make sure you already entered your W-2 or self-employment income. No earned income = not eligible to contribute to IRA, which can make it see your contribution as excess contribution.
Gidget says
I’m having this issue. As of last week, they said it was because form 8606 isn’t generating. But now, I don’t know what the issue is. I show $6k deductible when it should be non-deductible. It seems like every year I go through this headache and have to tweak the forms.
Chicagoen says
Great job! Thank you very much.
Nancy says
Thank you for your very helpful instructions. I have gone through them twice and still have a problem with the H&R Block software. In Form 1099R both box 1 and 2a have $11,000 because contributions to 2013 and 2014 non-deductible IRAs were converted to a Roth IRA in 2014. Line 15b on Form 1040 now shows $22,000 where I believe it should show $11,000.
In attempting to fix this I followed your suggestion in a previous post by leaving out the $11,000 from the 1099R 2a box in my data entries. The H and R Block 1099R worksheet box 2a changed to $0 but the form 1040 line 15b continued to show $22,000.
H and R Block support said the amount on form 1040 line 15b comes from the 1099R worksheet Line 2A, which is really a box. The only suggestion they had was to right click on the Form 1040 line 15b total and change it to $11,000. However this is an override and their assurances that the return is accurate are no longer valid and one can’t electronically file.
Do you have any other suggestions as to how to tackle this issue?
Nancy says
Hi again,
I have just compared an IRS 1040 with the H and R Block form. The H and R Block 1040 is a bit confusing with the numbering. H and R Block has a box in front of 15a, a box after it with a b showing to the right of the second box and then the 15b line in the column of other entries. So what I thought was an entry in 15b is actually an entry in 15a which should reflect the actual distributions shown on the 1099R. I believe the entry in 15a should be $11,000 rather than the $22,000 currently shown in the 1040 as discussed in my previous post. Sorry for my confusion.
Harry Sit says
You didn’t say whether you were doing it with H&R Block online or installed software. If you are using installed software, just follow the exact sequence as shown here except you enter 5,500 instead of 0 in the screen “Your Total Basis in Traditional IRAs.”
Brian says
Thank you so much for posting this! These step-by-step instructions are extremely helpful!
jaime fernandez says
this is fantastic. You helped me out with RSUs and now i look for your web site before TaxCut, TurboTax or the IRS. Very clear explanations for a very complex transaction (its not hard to understand the concept, but getting it on the right forms is really tough)
thanks for all your time
Paul Arking says
This page has truly been such an incredible help! I had been going through the TaxCut IRA sections again and again trying to figure this out, but getting nowhere. I had reached out to my investment advisor who was helpful in theory, but couldn’t help much in terms of the software specifics, or even regarding the accounting specifics of how to file. In desperation, I googled some keywords and this page come up as one of the first results—and in a matter of less than 5 minutes, I was able to achieve what I was fumbling with for hours. THANK YOU!
(Side note: I forwarded this link to my investment advisor so that this might be useful to any of his other clients who might be utilizing Backdoor Roths and trying to file on their own!)
g says
My husband I are so lucky we stumbled across your article. Your instructions were exactly what we needed and they were easy to follow. Thank you so much!
BDS says
I performed a Backdoor Roth in 2014 with a traditional IRA basis of 0. After going through these steps, I took a look at my 8606 form. I see that line 1 (Nondeductible contributions to traditional IRAs for 2014) is blank.
Is this correct? Does it not count as a contribution if it’s converted right away?
Thanks very much for your helpful posts!
Harry Sit says
It’s correct. See comments 10 and 11.
BDS says
Thanks so much for the reply, Harry! Now I can rest at ease :).
These backdoor articles are super helpful; thank so much for doing them!
Tom says
Having the same problem as Naomi with the online program. H&R making it difficult as I can’t actually view the forms as far as I can tell. Any advice appreciated.
Tom says
Basically it seems it isn’t possible to have nondeductable contributions to a traditional IRA in the online software. It is zeroed out and no option to edit that.
Tom says
FYI Still could not figure out how to correct it in the online program. Even after trying to add an exemption to form 5329 section. I went to turbotax online which is much more straightforward and resulted in a several thousand dollar increase in refund.
Harry Sit says
I tried H&R Block online. The interface is different but it still works. If you can’t figure it out, maybe just buy the desktop software and follow the steps here, or use TurboTax and follow the steps in my other article.
Kendra says
Thanks so much for posting this. Very helpful! I wish I had known this earlier because now I will be off by a year. I plan to contribute *for 2014* IN 2015 and do the conversion for 2014 in 2015.
As you have pointed out, this will get me off cycle. To get on cycle, then I will also contribute *for 2015* and convert for 2015 in 2015. Can you do an example of what the 8606 would look like for someone who tries to catch up?
Based on what you posted, I think I understand how it should go for 2014 tax prep but given the catch up proposed in 2015, what would the 2015 8606 look like? Thanks again.
Harry Sit says
It will look like this one in a comment on the other article. That reader caught up in 2014. You just add one to the respective years.
http://thefinancebuff.com/backdoor-roth-tax-return-made-easy.html#comment-16569
T. J. Allard says
Mr. Sit,
Thank you for the very helpful information in this post and in your other posts.
I did my contribution and conversion the easy way, for 2015. Unfortunately, I did it the hard way for 2014. I’m in the same situation as Comment #29 under the Make Backdoor Roth Easy on Your Tax Return post.
Using the installed version of H&R Block Deluxe, I’ve carefully followed the information in this post (again, very helpful), but my Form 8606 Part I does not contain any entries. The entries in Part II are correct.
I did verify the contribution and conversion were handled correctly by looking at Line 15A on Form 1040.
Any suggestions would be appreciated.
Thank you,
T. J. Allard
Harry Sit says
T. J. Allard – If it’s otherwise correct, Form 8606 Part I being blank is not a problem. See previous reply to another reader.
http://thefinancebuff.com/backdoor-roth-tax-return-made-easy.html#comment-15106
T. J. Allard says
Thank you, Harry.
I previously read through those posts but I didn’t catch it at the time.
I appreciate the help and the help you’re giving so many others,
T. J.
CD says
So, I made tax prep hard and contributed $5500 to traditional IRA in March, 2015, for 2014 tax year. A few days later I converted it to a Roth IRA. I know now to never do this again and contribute and convert in the same tax year. Anyway, I entered the contribution as you stated in the “Nondeductible contribution” section. I have not received a 1099- R yet but will later in the year I am sure. So, I am confused as to what I should do. My tax owed went up, but do I just leave it and then report the 1099-R in 2015 even though it related to the contribution made for 2014 tax year? What are the steps I should do if this is the case?
Harry Sit says
Your tax owed should not go up if you just enter a non-deductible contribution. You should find out why. You will get the 1099-R for 2015 next year.
Jeff says
Hi–thanks for the article!
I spent an hour with the HR block folks on the phone and still can’t figure it out.
My situation is that I contributed $1400 in 2014 but stopped because I changed jobs and my income exceeded the limits for a Roth contribution.
This year (2015), I converted that original $1400 contribution to a non-deductable traditional and then contributed an additional $4100 for a total of $5500, which I converted back to a Roth.
How do I account for this in HR Block online?
thanks!
Harry Sit says
Read “What to Report” section again. Tell it the way it happened. You contributed $1,400 to a Roth IRA. You recharacterized the contribution (not converted). You contributed $4,100 to a traditional IRA, but the contribution was made in 2015.
Jeff says
Thanks–so I recharacterized the $1400 and converted the $4100? Since I recharacterized the $1400 into the traditional, would I report that I converted $5500 of the traditional to the Roth?
Harry Sit says
Not on 2014 tax return. Read “What to Report” section again.
CD says
I contributed $5500 to a traditional IRA in 2015 for 2014. I then converted it to a Roth a few days later in March 2015. So, in the section where I enter in my total basis for traditional IRAS (in your nondeductible IRA section above) , do I put $5500 as my basis in my traditional IRA since I am not reporting the convert until 2015 when I get my 1099-R?
Harry Sit says
Read the on-screen instructions. It’s asking about previous years (years before the year for which you are doing the tax return).
Steve says
When I follow this(unfortunately I made non-deductible contributions in 2013 in april 2014, and then converted past april 15), it adds the IRA distribution to my income. Should I set the basis to 0 or what?
Steve says
Figured it out-forgot to enter a basis for last year’s contribution.
Brittany says
Great article! I am actually in a situation where I already had a traditional IRA in 2014, converted all of it to a Roth IRA in 2014, and then recharacterized part of it in March 2015. It should be simple to report this recharacterization, but I’m using HR Block deluxe online program and it keeps giving me an error! After 6 hours on the phone with them they don’t know how to fix it because none of them even know what a recharacterization is!! Do you have any idea how to report this in their software? (I realize this is ridiculous that I am asking you instead of them, but I am desperate!!)
Harry Sit says
Brittany – Your scenario has little to do with the subject of this article. Sorry I can’t help you.
Joanne says
I am online doing my taxes free with H and R block and one of the tax questions that I am stumped about is Value of your Traditional IRA. Do I have to give the total amount that I have in my IRA? Please help!
Harry Sit says
Yes, the total value of all your traditional, SEP, and SIMPLE IRAs from your end-of-year statements.
Anu says
Fantastic … thank you very much for taking the time to explain how to do back door Roth contributions in H&R. I will also follow your advice about making future back door contributions and conversions in the actual tax year.
Masha says
This was so very helpful, thank you so much for publishing this guide.
Jen says
Thank you very much for posting this. It was extremely helpful.
Dan says
Thanks for this very helpful guide. I contributed $5000 to traditional IRA in June of 2015, and then had to withdraw all deposited funds a couple of months later to pay for unexpected expenses. (I made $3 in interest by that time, also withdrawn.) Bank sent me 1099-R, with code “1” (not qualified withdrawal…). How do I convince HR Block tax form that this is just a reversal, and is not to be considered an IRA deposit/withdrawal at all? (According to pub. 590A, IRA contributions which are withdrawn the same year they are deposited are not considered as IRA contribution/withdrawal at all…).
Thanks for any ideas,
JenG says
Do you know how to do these same screens for the State of New Jersey?
Yag says
Did you get answer on how to do this for NJ state? I am still struggling where program is calculating hefty taxes on it.
Jackie says
Yag,
Not sure if this is the right way as the questions don’t make much sense but I got it to show up as excludable IRA withdrawals on my NJ return, thus got the correct tax treatment.
** NJ State IRA Input:
Retirement Plan and Pension Income:
Your IRA value as of 12/31/2015: 0
First year of IRA distribution: yes
IRA contribution: $5,500
Your IRA Result: tax free for NJ
On NJ-1040: this shows up in line 19B :”Excludable Pensions, Annuities, IRA Withdrawals”: $5,500
Cynthia says
Hello, I tried to follow the same instruction steps for 2015 tax year using HRBlock deluxe, however, it does NOT show me the question for IRA->Roth IRA conversion in the interview steps, I used to see that in 2014 HRBlock deluxe, but for 2015, the conversion related question seems gone from the 1099-R interview steps as well as the IRA contribution steps. May someone please help here? Thanks!
Harry Sit says
I just went through it in the 2015 software. The screens are more or less the same. In the “Distribution Rolled Over” screen, still answer “I didn’t rollover this distribution.” The conversion related questions come up next.
Cynthia says
Thanks for the reply. You are right. I missed the step to check box 7, “is the IRA/SEP/SIMPLE box checked”, once I checked that as yes, the conversion questions show up as demonstrated in your flow. Thanks.
KG says
Thank you so much for this. I got so scared when I received a 1099-R showing a taxable distribution (taxable amount unknown) for what I knew to be an after-tax contribution and thought “Great…I tried to save a few $ extra for retirement and hurt myself in the process.” I couldn’t tell when I did the transactions in HRB whether I had done them correctly, and was about to throw in the towel and hire an accountant. Right before I closed the laptop, I decided to google the question and came across your article. I deleted my previous entries (which had actually been correct), wrote down the tax figure, and then followed your steps, watching the tax bill go up and then back down, just like you said it would.
Gana says
Just wanted to post in case anyone else runs into this problem using the Deluxe Software:
Even with following all of the steps above, my Part I on Form 8606 remained blank, and I was being taxed again on my $5500 non-deductible IRA contribution/conversion. I went through the steps in this post again and again, and I couldn’t figure out how to fix it and get the software to recognize that this was a nontaxable contribution. Eventually, I tried unchecking the box at the top of Form 8606 (right above Part I). The form does allow you to manually uncheck it. Once I did this, the software finally recognized that I had made a non-deductible contribution, and it filled out Part I (and the rest of Form 8606) correctly.
Jackie says
Gana,
You are one to fix my problem. Thanks a million! As I posted I have spent days on this one issue and only by unchecking the box you indicated everything all the sudden are good! can’t thank you enough !
The aggravation I had with HR Block for this one item every year makes me wonder if it is all worth it to save money to do my own return even though I am a CPA and know tax laws. The software is sometimes absolutely hard to work with.
Al says
Jackie, we also had irritation with H&R Block last year as well as this year. The program works fine – I think turbotax is a little easier for the first few years, then H&R Block seems easier as things get more complicated. Last year there was a state form not included. The “help” people didn’t know anything about it and basically blew me off after I had tried to chase it down for hours. This year I needed to go from joint filing to Married Filing Separately because of a single non-resident return, and the only way to do it is to delete one taxpayer entirely (the wrong one!!) or restart all new. I called to ask if there was a way to do it and the “help” person informed me that he didn’t know the technical details of the program or whether this was possible. Another blow off.
And that was after I spent 2 hours trying to figure out why my Trad to Roth conversion wasn’t filing correctly – one small box with lots of consequences! Finally got it.
We might go to TaxAct next year and see how it works. The screenshots look much more barebones, so hopefully simpler architecture for a complex problem.
Al
Alice says
Finally! An answer to my question. Thank you for this post! I spent hours trying to figure out why my non-deductible, converted distribution was showing as taxable on Form 8606 Line 18. It was that check-box! I had no idea you could manually uncheck the box. What a simple solution. This software bug is maddening. Thank you Gana!
Al says
Hi, thanks so much for posting & updating again! We use this guide every year!
Question: My 1099R has two lines of numbers in boxes 1 & 2a — what does that mean? Or, more correctly, do I enter two lines in H&R block when there is only 1 box entry for Box 1 & Box 2 #s?
For example:
Box 1 Box 2a
10 0 (G in box 7)
5500 5500 (exactly as you list above)
Al says
Doing more digging… looks like I enter the sum of box 1, the sum of box 2, and then there are multiple distribution code boxes. However, when I try to do this, H&R says that codes G & 2a are not compatible. I’m going to enter each line as a 1099-R so I can work through the part that isn’t a backdoor Roth on its own.
Jackie says
I just spent my entire today on making the backdoor IRA conversion to work and failed. It worked for me prior years but this year it is not working. The tax advisor worked with me for 2 hours and concluded that he needs to go back to tech support for me.
I have been reporting exactly like what Harry Sit instructed and I am myself CPA but it is not working this year. The worksheet line 12 for some reason didn’t transport to form 8606 line 1 and I have my entire return finished without form 8606 generated. Getting help from HR Block has been impossible after spending whole day going around circle.
Jackie says
After squaring away the Federal software bug , the conversion became taxable on NJ return. Give me a shout if anyone needs tips on NJ state return. I managed to make it appear as excludable IRS withdrawals on NJ return in the end.
Jay says
Hi Jackie – Thanks for the tips on the federal return. Now I’m struggling with NJ. Any tips?
Jackie says
Hi Jay,
Hope you get this on time.
Not sure if this is the right way as the questions don’t make much sense but I got it to show up as excludable IRA withdrawals on my NJ return, thus got the correct tax treatment.
** NJ State IRA Input:
Retirement Plan and Pension Income:
Your IRA value as of 12/31/2015: 0
First year of IRA distribution: yes
IRA contribution: $5,500
Your IRA Result: tax free for NJ
On NJ-1040: this shows up in line 19B :”Excludable Pensions, Annuities, IRA Withdrawals”: $5,500
Robert Redman says
HR Block Deluxe Online definitely has a bug. My $0 basis nondeductible IRA contribution, and full conversion to Roth were both in 2015, so this is the easy case. It doesn’t work, and I am charged taxes for the distribution. I’ll go through step by step since the screens are different than what is in this article.
Income -> 1099-R
Page 1: I input the 1099-R income with code 2 (early distribution, exception applies) on Page 2: Selected the “IRA or SEP” as my source
Page 3: Selected the “I converted or reconverted my IRA or SEP”
Page 4: Hit the same issue others mentioned, where it would not let me enter $5,500 in both boxes 1 and 2a even though that is what is on my printed 1099-R from the bank. So I leave 2a blank, check both 2b boxes, and check the 7 box
Page 5: Enter that I converted the entire $5,500 into the “amount converted” box, and click Yes for “Do you have a basis in your IRA” since I made nondeductible contributions.
Adjustments & Deductions -> IRA conversions
Page 1: No I didn’t recharacterize
Page 2: Yes I converted all of my traditional and SIMPLE IRA accounts to Roth IRAs in 2015 and I didn’t recharacterize any converted amounts
Adjustments & Deductions -> Traditional IRA contributions
Page 1: Enter $5,500 for the contibutions through April 18, 2016 and $0 for contributions between Jan 1 and April 18, 2016
Page 2: This “Your Nondeductible IRA Contribution Withdrawal” page has the “Nondeductible contribution” text box un-editable and forced to $0. THIS IS BUG #1. I should actually enter $5,500 here, and if I did maybe the software would correctly fill in part 1 of form 8606. In the “Amount withdrawn” textbox I go ahead and enter $5,500
Page 3: Enter $0 as the total value of my traditional IRA, since it asks for the value as of Dec 31, 2015 and the conversion was made before then.
Page 4: No I didn’t recharacterize
Page 5: Enter the history of my IRA contribution and distributions for previous years
Page 6: No I don’t have excess traditional IRA contributions from prior years
Page 7: This “Your IRA Basis” page has incorrect information on it, THIS IS BUG #2. The page asks you to enter the basis only for prior years, and specifically says to look at 2014 or earlier. Since my account started with $0 I enter that, but that causes the software to fill in part 2 line 17 with a $0, and then I get charged taxes. The real IRS form 8606 line 17 simply tells you to “Enter your basis in the amount on line 16”. If I was filling out this form by hand I’d read that, enter $5,500 on both lines 16 and 17, and owe no taxes. The 8606 instructions page 8 is even more specific that this value should be $5,500 https://www.irs.gov/pub/irs-pdf/i8606.pdf quote “If you did not complete line 11, enter on line 17 the amount from line 2 (or the amount you would have entered on line 2 if you had completed that line) plus any contributions included on line 1 that you made before the conversion.” Those are terrible instructions, they should have just said enter on line 17 the amount from line 3… but it’s still the same. Line 1 $5500 + Line 2 $0 = $5500
HRBlock is wrong, they have 2 bugs. Enter the total amount you contributed to your IRA as the basis they ask for on page 7, and then you won’t get charged tax. The final tax return is still incorrect though since only Part 2 is filled out. As previously mentioned by others, if you followed the instructions for the 3 stipulations at the top of form 8606, you actually should have also filled out part 1. But the final results are the same.
Harry Sit says
Did you have a W-2 entered already, with a large enough income and the retirement plan box checked? Maybe it thinks you are eligible for a deductible contribution to your traditional IRA. If you are indeed eligible for a deduction, the taxable conversion washes out your deduction.
Harry Sit says
Also on your “Page 2: Your Nondeductible IRA Contribution Withdrawal” you shouldn’t enter anything. You didn’t withdraw your contribution if you converted. When I have the right box checked on the W-2, a box for “I was covered by an employer retirement plan in 2015” on the previous page is automatically checked, and the non-editable amount correctly shows as $5,500.
Anyway, I find the installed software much better than the online one. If you can’t make it work with online, buy the installed software. It’s both less expensive and easier to use.
JR Behun says
I am still having the issue and hoped the software would have been updated for 2015.
I made the $6500 contribution to the Traditional IRA (I am over age 55) for each myself and my spouse. I am retired and this put the $6500 into a deduction mode. My spouse is working and this put that $6500 in non-deductible mode.
We converted both to a Roth (all this was done in 2015). No distribution was taxed.
Summary: the $6500 was deducted (not sure if it should have) for the retired spouse. Of the $13,000 converted to Roth, none was taxed.
In tax year 2014, no deduction was taken for any IRA and non was taxed (which was correct).
What is wrong here …. should that $6500 for the retired spouse shown in the ‘deductible IRA’ zone? and if so, why doesn’t the 1099-R data showing the distribution get taxed to essentially void this out?
Harry Sit says
Because you are retired and therefore don’t have a retirement plan at work, if your spouse has one at work, you have a higher income limit for taking a deduction than your spouse. If your income falls in between the two limits, it explains why your contribution is deductible but your spouse’s isn’t. You must have entered the distribution for your conversion wrong, thinking yours was nondeductible and you had a basis when it was actually deductible and you don’t have a basis.
David Haught says
Harry:
Background: I have been doing BDRs for my spouse for several years using HRB home edition software. So far, there have been no issues until now when attempting to do a BDR for tax year 2016.
Situation:
– I am the sole income earner; married filing jointly.
– I am covered by a retirement plan; my wife is not.
– I made a $6,500 ND contribution to my TRAD IRA on 1/5/16.
– I made a $6,500 ND contribution to my wife’s TRAD IRA on 1/5/16. This IRA had no balance or basis.
– I converted my wife’s TRAD IRA to a ROTH IRA on 1/7/16. There was no growth/earnings between contribution and conversion.
– Received 1099-R reflecting the distribution of $6,500.
– I followed your very helpful instructions from the 2015 Blog on BDRs using HRB software. Everything was consistent with your instructions except the software says the contribution to my wife’s TRAD IRS is deductible. Is that right? Do I get the benefit of a TRAD IRA deduction AND the ROTH conversion? If so, do I have to go back and change the ND contribution to deductible?
Thanks in advance for your help.
Harry Sit says
Depending on your income, the contribution to your wife’s traditional IRA can be deductible. Make sure you have all your income accounted for. If you will receive more 1099 forms, by the time they come hers may no longer be deductible.
Assuming hers is still deductible, if you take the deduction, the tax on the conversion will wash it out. Depending on her age and which state you live in, there may be a benefit on your state income tax. See Deduct-and-Convert: Save Hundreds in State Income Tax on Roth IRA Contributions. If that doesn’t apply to you, it’s just a wash either way: take deduction, pay tax on the conversion; don’t take deduction, no tax on the conversion.
However, if her contribution was deductible, you have the choice of recharacterizing her Roth conversion and putting the money back into her traditional IRA. This way when you take the deduction you will reduce your taxes this year.
David Haught says
Thanks for your quick reply, Harry. I think it makes sense in the long run to keep the conversion in the ROTH, without re-characterization back to the TRAD IRA. Since I declared the contribution as ND when I made it, am I required to go back to my custodian and declare it deductible (so it matches what I’m doing on the tax return?
Harry Sit says
You didn’t declare it was non-deductible when you made the contribution. The IRA custodian does not know or care whether it’s deductible or not. If the software treats it as deductible because she can, make sure you don’t say she has a basis. See comment 45.
John says
I used this procedure last year to file my 2015 taxes using the installed version of H&R Block software successfully. However, using the installed 2016 Edition for this year’s return and using the same procedure above, I can’t seem to figure out how to get the program to not enter my converted ROTH amount as taxable on line 15b on Form 1040. I’m wondering if others are experiencing this same problem and that this could be a bug in the software?
Harry Sit says
I used the same procedure in the installed 2016 Edition. It worked as expected.
John says
Thanks Harry. I meant to be entered as “non-taxable”on line 15b. I must be doing something wrong.
I had to monkey around with the Form 8606 to get the correct taxable amount to show on line 15b of Form 1040 which is $28 due to the increase of value between the short time I funded the traditional IRA ($6,500) to the date of conversion ($6,528).
The software automatically entered the amount of $111 for the cost basis that was imported from my last year return. I’m not sure if I should set the cost basis to $6,500 + $111 or leave it at just $6,500.
jessica hughes says
I was delinquent in contributing to our IRA’s for 2016 and didn’t do it until February 2017. If I am reading this correctly, i do NOT report the ROTH conversion I just did in 2017 with my 2016 traditional contribution monies. I will report this in 2017? along with the conversion i will do later this year with my 2017 contributions??
Harry Sit says
Correct. You do report the contribution though.
Jessica Hughes says
That’s what I did–many thanks!!
Miale says
Using H&R Block online to do my son’s taxes and he transferred his small ($2,544) 401K funds from Transamerica to a Roth IRA at another company. He got a 1099 from Transamerica showing code G in box 7 and nothing in line 2a. The 1099R from the receiving company shows code 2 in Box 7 and the Box 1 and 2a shows $2,544. The problem is when we put this information into H&R Block, it shows there may be duplication and it only gives us the option of calling the 2nd 1099R a regular distribution or an indirect rollover. It doesn’t ask us if there was a Roth conversion. I really don’t know what to do at this point.
WS says
Same here. Very frustrating.
Jay says
Great article Harry.
I have never contributed towards a Traditional or Roth IRA. I or Spouse dont have any IRA accounts.
I have yet to file my 2016 tax return. To catch up, I plan to open a new Traditional IRA (for both myself and spouse, for 2016 year); I will likely convert to Roth IRA shortly but likely after filing my 2016 return.
I will later this year also contribute for the 2017 year and convert to Roth before 2017 ends.
On the 2016 return –
(a) i just need to report my and spouse’s 2016 T-IRA contribution.
On the 2017 return –
(a) i need to report my and spouse’s 2017 T-IRA contribution
(b) report/import the 1099-R provided by the institution for the 2016 and 2017 T-IRA to R-IRA conversion
Does this sound correct theoretically? I am looking at the 2016 HRBLOCK tax software now and doing a mock 2016 and 2017 return just to feel things out.
Melanie says
This is a great article!
My problem is that I lost money during the year, so I contributed $5,500 in 2016 and converted in 2016, but I had to pay a brokerage fee. At the end of 2016, I only had $5,172 available to convert. Therefore, when Form 8606 is generated, it shows that I have no taxable amount, but now have a total basis in traditional IRAs (line 14) of $328. Not sure how that can be when my traditional IRA account is $0?
Harry Sit says
It’s OK. Don’t worry about it. The software will deal with it next year.
Vera Dovirak says
Hello and thank you for a great article. I’m really hoping you can answer my question, since I spent hours researching with no results in sight.
My scenario: contributed to traditional IRA (first time) this year for 2016 and 2017 and immediately converted. I don’r have a 1099R. This is the first year I’m using back-door conversion to ROTH due to income limits. Since I had no basis in traditional IRA for last year (since I didn’t even have traditional IRA to begin with), I answered “0” in HR Block software and it told me I wasn’t eligible for Form 8606 because I had no conversions. My 15a and 15b lines on 1040 are blank after I went through inputing my IRA contributions.
Question: what am I doing wrong and what is required of me to file with IRS.
Any feedback would be greatly appreciated!
Harry Sit says
Just do the second part starting with “Non-Deductible Contribution to Traditional IRA” for 2016. Some questions won’t come up when you didn’t have a 1099-R for 2016 (you will do that next year).
Moe says
Thank you for posting this
Dan says
Hi there, I am working on the free software available online. I attempted following your tutorial although the free software apparently has different prompts and screens. Still, after completing it I am getting the following summary which I believe is incorrect:
-Traditional IRA
-Traditional IRA contributions – deductible – $5500
-Traditional IRA contributions – nondeductible- $0
-Excess traditional IRA contributions – $0
I am wondering if I went wrong somewhere. Any advice is appreciated.
Thanks
Harry Sit says
If your income isn’t over the limit, making the Traditional IRA contribution deductible and making the conversion taxable will offset each other. If your income is over the limit, make sure you correctly entered your W-2 with the retirement plan box checked.
Dan says
I notice that if I enter in that I had a total 2017 contribution of $5500 and then change the amount I withdrew on the next screen to $0 , the final screen summary reads different than before:
-Traditional IRA
-Traditional IRA contributions – deductible – $0
-Traditional IRA contributions – nondeductible- $5500
-Excess traditional IRA contributions – $0
I wonder if that is enough and in any case as long as the 8606 is filled out correctly I am good? This form apparently will not be available until later this week. I’m also wondering why after entering the same info in, I am getting a better return from TT than from using H&R Block software (free due to being below income limit). I suppose I am entering info in in error somewhere as they both should be churning out similar return estimates.
Harry Sit says
You should enter the numbers truthfully according to what actually happened. Don’t only try to make it look a certain way. Make sure you understand what each action means:
Contribute – put money from your bank account into the IRA
Withdraw – take money out of the IRA back into your bank account
Recharacterize a contribution – change a contribution from one type to another (assets moved as a result)
Convert – move money from Traditional IRA to Roth IRA without any change to the type of the original contribution
To compare results between different software, print out the forms and compare line by line.
Julia says
I’m using H&R 2017 Deluxe. I followed the instructions – entered the 1099 IRA distribution as income and the IRA non-deductible contribution in the adjustments. It’s not zeroing it out on the 1040. I contributed 5500 to an IRA and immediately converted to a Roth…no earnings or anything special to deal with. Is there something different in 2017 that I need to do?
Harry Sit says
Nothing different in 2017. If your income exceeded the limit, make sure you had the retirement plan box checked on your W-2. When you say it’s not zeroing out on the 1040, what does the 1040 show in lines 15a, 15b and 32?
Julia says
15a and 15B are both $5500. 32 is 0. I noticed that form 8608 didn’t have the top section completed. If I manually updated line 17 (one of the only things you can update directly) to $5500 then it all seemed to work as expected. Am I OK making that change on 8606 – saying my basis is $5500? I didn’t have any prior funds in that IRA so I had entered 0.
Harry Sit says
It’s better to delete everything related to your IRA and start fresh. Sometimes your previous incorrect entries get stuck. Delete your 1099-R, 8606, and any related worksheets. Start over by following the steps here.
Masha Sapper says
Hi! I contributed $5,500 for the 2016 tax year to my traditional IRA and immediately converted in early 2017. I then contributed $5,500 for the 2017 tax year to my traditional IRA and immediately converted in late 2017. When I try to follow the instructions you so kindly provided above, I am running into two issues:
1) It seems to me that I should be able to denote half the contribution for the year (my 1099-R shows a total of $11,000) as applying to 2016, but I cannot seem to figure out how to do this.
2) Line 15 of my 1040 shows the full $11,000 as being taxable, when I believe that none of it should be.
Can you help?
Harry Sit says
If you really followed you should at least get the 15b amount down close to $5,500, i.e. having taken care of 2017. After that, just enter $5,500 in the Your Total Basis screen for your contribution for 2016. That will take care of the rest.
Masha Sapper says
Julia, I worked with H&R Block’s support on this, and they had me go into the 8606 form and under Part I and before line 1 there’s a box that says to check it if you meet both requirements. H&R Block support told me to uncheck that box and then it worked properly. They said they thought it was a bug.
Harry, thanks, updating the total basis fixed the other half of the issue!
Julia says
Thank you so much. That worked perfectly.
ABC says
I seen to have screwed up … but I guess this is how you learn.
Until 2016 we did not hit the Roth Income limit and there was no complication.
After stting down to do our doing our taxes, I found out that the AGI for 2017 falls inside the MFJ income limit where benefits are phased out.
So I proceeded to do a backdoor Roth that I have been reading about in this and other forums for years.
Last month, (February 2017) I contributed $5.5K + $5.5K to IRA for 2017 for both of us.
A week after that (February 2017) I converted both the IRA’s to Roth’s.
As I sat down to file 8606, I realized we don’t have the 1099-R because the IRA contribution for 2017 was made this year (2018).
It was only after speaking to Vanguard, my mistake became apparent. The backdoor Roth conversion that I did last week (Feb 2017) applies to 2018 and not 2017.
In effect, I made an IRA contribution for 2017 and a Roth contribution for 2018.
Maybe this can be fixed next year when Vanguard sends me the 1099-R for 2018?
Meanwhile, since there’s no 1099, I can’t even report the non deductible contribution this year on my online tax software.
What should I do?
(In addition to the e-Filed returns) should I mail the IRS a hand entered 8606 for 2017 showing $5500 non deductible contribution in 2017 for each of us?
Any help will be appreciated.
Harry Sit says
Contribution and conversion are two separate actions. You can and should still report the contribution even though you won’t report the conversion until you get the 1099-R next year. Just skip to the second half of this post starting from “Non-Deductible Contribution to Traditional IRA.”
Will says
What if I did a conversion of my 2016 traditional IRA contributions in March 2017 prior to filing my 2016 return?
I initially reported it as converted on my 2016 return, but now I have a 5498 for 2017 that shows the distribution. Looks like I need to amend 2016 to show the traditional contribution (which results in a deduction), then report the 2017 conversion of the entire basis (no earnings involved). I would think this would result in my deduction from 2016 being reversed, but it looks like there’s a penalty or some other tax involved.
Will says
Correction…I have a 1099 for 2017
Harry Sit says
You should report the conversion on 2017 return. If you used software, without a 1099-R, I don’t know how you could’ve reported the conversion on 2016 return. Your contribution for 2016 may be deductible or non-deductible depending on your income in 2016 and whether you participated in a workplace retirement plan.
Dani says
OMG!! You are AMAZING! Thank you sooooo much for this info!!
Really really really appreciate it!
Sea Marie says
Any advice for what to do if the software appears to have a rounding error in the pro-rata calculation?
I contributed $5500 (non-deductible) in 2016 and 2017, for a total of $11,000. Converted $11,007 to Roth afterwards.
Line 10 is 0.999 in H&R Block, which leaves me with 10,996 on lines 11 and 13, and $4 on 14.
If lines 10 used 0.9994 (4 decimal places), I’d have a -0- on line 14, as expected.
Did I do something wrong, or is this just the software? If I efile as-is with the $4 basis (and resultant $11 taxable gain) can I correct this later without paying any additional fees?
I know that $4 is practically nothing, but it’s going to be annoying to carry this forward to next years return
Harry Sit says
Not worth worrying about. If you forget about the $4 and you don’t carry it forward, you pay tax on $11 versus $7. That makes your tax go up at most by $2.
Sea Marie says
Thanks!
I’m always trying to reduce my audit risk (because I lost some documentation for my deductions from a few years ago), so the possibility that I’ll forget to carry forward the $4 scares me, but the IRS probably doesn’t care as much if I make a mistake in their favor. Not to mention that I’ve spent enough time worrying about it this year that I probably won’t forget 🙂
Chris says
Why is H&R block software not letting me put 0 as 12/31 balance in Traditional IRA’s? 0 is what’s accurate. Is it how I answered a prior question? Need to get line 6 on 8606 to say zero. Thanks for any input
Harry Sit says
I don’t see the question for 12/31 balance in the series of screenshots here. If you had 0, maybe answer ‘yes’ to Convert All Your IRAs?
Archana says
Hi Harry – many thanks in advance for any help you can provide here. I’ve been trying to figure it out for a couple weeks now and am at the point of repeatedly jamming my head into my keyboard until it starts to make sense (proving unsuccessful thus far).
My situation:
– Contributed $5500 to a Roth IRA in May 2017 for Tax year 2017
– Contributed $5500 to a Roth IRA in January 2018 for Tax year 2018
Upon receiving my W2, I realized that I am within the phase-out limit for Roth IRA’s for 2017 and likely will be for 2018.
In February 2018, I converted (or recharacterized?) $4500 of my 2017 Roth IRA contribution to a Traditional IRA and converted it back to a Roth IRA within a few days. Since I’m within the $118-133K income, I was allowed to contribute $1000 directly to the Roth IRA.
I also converted (or recharacterized?) $5500 of my 2018 Roth IRA contribution to a Traditional IRA and converted it back to a Roth IRA within a few days.
I’m using HR Block online to file my taxes. Can you please help me figure out how to approach my 2017 tax return given the conversion from Roth IRA -> Traditional IRA-> Roth IRA? The retirement box on my W2 was checked as well, since I contribute to a 401k through work.
Harry Sit says
You recharacterized in both question marks. Do the second part starting from the “Non-Deductible Contribution to Traditional IRA” heading. Check the Roth IRA box because that’s how you originally contributed. When it asks whether you recharacterized, say yes and give how much you recharacterized. You will jam your head more next year but you have at least a year to prepare for it.
Ralph says
I’m in a similar boat this year:
– Contributed $5500 to a Roth IRA in Jan 2018 for Tax year 2018
– Contributed $6000 to a Roth IRA in Jan 2019 for Tax year 2019
Discover in Feb 2019 that I’m over $130k in 2018 and will be in 2019 as well. Since I had a old TradIRA I first transferred then entirety of it to 401k. Then opened a new blank TradIRA. Then I did a recharacterization in Feb for both amounts from Roth to that new TradIRA and immediate converted them back to RothIRA.
Since I did both in 2019, what are my steps for filing in 2018 vs what I have to do for 2019? I expect a 5498 and a 1099-R next year about the recharacterization for the 2019 filing because of the gains of the 2018 funds before they were switched. So as far as 2018 filing…… do I only show the initial $5500 that was put into RothIRA at that time?
Harry Sit says
You show the $5,500 originally contributed to Roth and subsequently recharacterized as contribution to a Traditional IRA. This becomes the basis you carry over to the following year.
Archana says
Hi Harry! I’m the same Archana who posted a year ago with the dual recharacterization/conversions. You were right in saying “You will jam your head more next year.”
I’ve been dreading doing my taxes because of the complicated nature of this backdoor Roth situation. I followed your advice last year and now, I received two separate 1099-R’s from Vanguard this year – one for my Roth IRA for $10,650 (that I initially contributed to and then recharacterized) and one for my Traditional IRA for $10,800 (that I then converted back to a Roth).
I’m using H&R Block’s online software to do my taxes again. I uploaded the 1099-R for my Trad IRA and selected the distribution code 2 (“Early distribution, exception applies”). I selected “IRA or SEP” as the source of my distribution or rollover and then stated that “I converted my IRA or SEP.”
When asked “How much of your distribution did you convert or reconvert within 60 days of receiving the distribution?” I stated $10,800. Do I also say that I have a basis in my IRA?
Then, when I got to the adjustments section, I checked both “I converted a traditional IRA.” and “I contributed to a Roth IRA.” I stated that my 2018 IRA contribution was $5500. I am then prompted to answer “Tell us about any withdrawn nondeductible contributions.” with a box for my nondeductible contribution and another box for the amount I withdrew, if any. What would I put for this?
Lastly, what do I do with the 1099-R for my Roth IRA? It currently has Distribution code R written in box 7. (“Recharacterized IRA contribution made for 2017 and recharacterized in 2018”).
A debt of gratitude to you for any help you can provide here – it is most appreciated!
Harry Sit says
Archana – Your basis in the Traditional IRA from the previous year is the $4,500 you recharacterized. “Withdraw” means taking money out of the IRA to a taxable account. You didn’t withdraw any. Enter the other 1099-R with the R code as-is as a separate 1099-R and just follow the prompts.
Archana says
Thanks, Harry. When I initially recharacterized from the Roth IRA to Traditional, the value was $10,650. By the time I converted this back to the Roth, It had grown to $10,800. How do I represent this?
Do I say that I contributed $5500 to my traditional IRA for 2018? Or higher than that?
Harry Sit says
Archana – Both numbers are represented by the two 1099-Rs respectively. Enter them as-is. You don’t say you contributed $5,500 to your traditional IRA for 2018 because you didn’t do that. You contributed zero. You contributed $5500 to a Roth IRA in January 2018 for tax year 2018 and you recharacterized the entire $5500 to traditional IRA later in 2018.
Alice K says
Hi Harry,
I have a 1099-R form from my employer associated 401K plan. I had contributed post-tax money to the 401K and converted the majority of it to a Roth 401K. So the money that I had already gained as interest is taxable and reported in line 2a. However the distribution code is listed as G. Per H + R online, this is a sticking point and can be in error, so I can’t proceed to e-file and must mail the return. Looking at the instructions for forms 1099-R says that a direct rollover of a distribution from a 401K plan to a designated Roth account in the same place, the amount rolled over in box1 $10,029.17, taxable amount in box 2a $184.03, basis recovery amount in box 5 $9,845.14, and use code G in box 7. So it seems that the form is correct. Is there any way around this or is my only option to mail it?
Thanks so much for your time and help,
Alice
Harry Sit says
I don’t know about restrictions on efile. I always mail mine anyway.
Travis says
Hi,
Desperately need some help! In July of 2018 I rolled over an old 401K, from a previous employer, into an IRA. Then one month later, I converted that $2500 IRA to a Roth IRA. Fidelity sent me a 1099-R form for the rollover. Shouldn’t I also have a 1099-R form for the conversion into the Roth IRA since that is what is taxable? I’m using H&R Block online to file my taxes and I feel stuck at the moment. Any advice would be greatly appreciated!
Thank you,
Travis
Harry Sit says
You should have one 1099-R from the 401k plan for the rollover, and another 1099-R for the Roth conversion. If both the 401k plan and the IRA are with Fidelity, the 1099-Rs are posted in different sections of Fidelity’s website (employer plan and retail accounts).
Travis says
In response to the latest reply.
I believe I found both necessary 1099-R forms. One of the forms says:
Box 1. Gross Distribution: $2500
2a. Taxable amount: $0.00
2b. Taxable amount not determined: (box not checked)
Total Distribution: (box is checked)
Boxes 3, 4, 5, 6: all $0.00
Box 7 Distribution Code: G
Box IRA/SEP/SIMPLE (box not checked)
The other 1099-R form I have says:
Box 1. Gross Distribution: $2500
2a. Taxable amount: $2500
2b. Taxable amount not determined: (box is checked)
Total Distribution: (box is checked)
Boxes 3, 4, 5, 6: all blank
Box 7 Distribution Code: 2
Box IRA/SEP/SIMPLE (box is checked)
Is the first 1099-R I described the rollover from my 401K to an IRA and the second 1099-R described the conversion from the IRA to a Roth IRA?
And lastly, do I just need to enter both of these forms under the income section of H&R Block’s online filing system and then I’m done with the IRA stuff? (I never actually touched the money, no checks, no deposits into my personal bank account. I did the rollover and conversion all online through Fidelity’s website).
Thank you for your help!!
Travis
Harry Sit says
That’s correct. The first one with code G in box 7 is for the rollover from the 401k plan to the Traditional IRA. The second one with code 2 in box 7 is for the conversion from Traditional IRA to Roth IRA. Yes you just enter both in the income section and answer the associated questions. Your Roth conversion isn’t the same as a backdoor Roth (the subject of this post).
Jedi M says
Really confused for 2018 tax reporting.
I’m using the H&R Block online, Premium version.
I uploaded the Traditional IRA 1099-R to the software. Now I go to the deductions section (adjustments in your guide), and it wants me to select both Traditional and Roth instead of just traditional.
Any updates for 2019 that I’m missing? I recall it was painful last year and I got through it, but I don’t know why it’s roadblocked this year.
Harry Sit says
I just checked the 2018 H&R Block software (installed, not online). No changes from the process shown here. Can you simply unselect Roth in the contribution part? Or if it has to be selected, answer ‘No’ or enter ‘0’ when it asks you whether/how much you contributed to Roth? Installed software usually works better than online. See Tax Software: Buy Download Or CD, Not Online Service.
GMon says
I rolled over all deductible money from a Traditional IRA into my 401k in order to clear the deck for backdoor Roth. I then contributed $5500 to my Traditional 401k and several weeks later converted it to Roth ($5501). I followed your article exactly, but I still end up with $5501 taxable on Form 1040 Worksheet box 4b. I would expect that to be only $1. I’ve also removed the “Taxable” amount from the 1099-R just to see what would happen, and nothing is different. Any idea what might be wrong? Any known bug in the 2018 software?
GMon says
I found it. I was answering “Yes” to this question:
“Did you convert all of your traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2018?”
When I changed this to “No” it worked fine. I had converted in the middle of a month, and at the end of tht month $3 of interest posted so at year end 2018 the traditional IRA still contained that $3.
Eliza says
I contributed for the 2018 year traditional IRA in January 2019 and then converted to Roth. I thought this would be ok because the amount of money in all my simple/SEP/traditional IRAs was $0 on December 31st 2018. It sounds like my situation is going to be complicated because I also converted a ton of money from my traditional IRA to my Roth IRA in July 2018. Now I do have to calculate basis because of the contribution made in January?
Harry Sit says
Your contribution for 2018 in January 2019 does not affect your conversion in July 2018 when your balance as of December 31 2018 was zero. If the contribution was a non-deductible contribution, you will carry it as basis to 2019.
Phil says
The HR Block steps for 2018 software are not accurate. I’m trying to do a backdoor Roth conversion for my wife for $5500 and yet again this year it is not working properly. I’ve used your site in the past, but you are not displaying the extra page telling me how to “correct” the 2018 excess contribution, yet there are no options I can see to fix this and now my taxable amount has jumped up $2k. There is nowhere that it is allowing to fix this. Any advice is appreciated as always, I love this site each year for this very purpose!
Harry Sit says
These screens were taken from the 2018 H&R Block software installed on my computer. If your scenario matches the example used, following the same steps works, as the screens showed. I didn’t skip any extra pages. Check line 4a on your Form 1040 to confirm how much you are taxed. If it’s not correct, delete all 8606 forms and 1099-R worksheets and start fresh by following these steps.
Phil Spanninger says
Sorry, to confirm it is the 2018 version. Here’s what i had to do to make it work for a ROTH conversion (thats what isnt working in the instructions, as the 8606 didnt produce as it should):
1. I followed all the same steps as your Traditional IRA, and kept getting fully taxed on the $5500. So i tried a couple other methods, still with no luck.
2. I started over as a “traditional” and when i got to the part about whether it was “recharacterized” i said YES, and entered some Roth info. That ALSO didnt work, kept telling me i was going to be taxed for it. So i clicked “Back” a couple times, said “no” for recharacterization (and left that other info in the system), and then followed the remaining steps… and it somehow magically worked.
3. What i still dont understand is exactly WHEN the system is applying the rule. It doesnt seem to work when i followed your exact steps… and plus, its not really a traditional IRA, but doing it as a Roth doesnt EVER work for this backdoor method… it was saying we owed money every single time since my wife already contributed to a work Roth IRA.
I am 95% sure i had to do it this way in 2017 too so it would force the system to do it properly. I wanted to avoid editing the 8606 manually since it would invalidate the filing. Any further thoughts on this? I dont fully trust it but it looks ok now… just a major pain that they dont give you this option in the software as a simple question!! I literally had to do this 6 different times to make it work; the software was not playing nice.
Harry Sit says
It’s better to follow the steps fresh in one pass. If you already put in some wrong answers and you go back and forth to correct them, some of the wrong answers may get stuck somewhere you no longer see.
I’m not sure what you meant by “its not really a traditional IRA.” In the scenario used in this post, you contributed to a Traditional IRA and then converted the money from the Traditional IRA to a Roth IRA. The money ended up in a Roth IRA but it went into a Traditional IRA first.
Dylan says
Can confirm there’s a problem with H&R block 2018. Line 4a is refusing to calculate properly. I followed your steps precisely. 4a.a was $5500, but 4.b was also $5500 (instead of $0). Redid several times.
Harry Sit says
Did you see the “No IRA Deduction” screen? Make sure you didn’t inadvertently make yourself eligible for a deduction for contributing to the traditional IRA (forgot to check the retirement plan box on W-2; didn’t enter a high enough income yet to put you above the income limit; etc.).
Dylan says
Harry- My error – Your instructions were spot on. My mistake was importing from Vanguard (I double imported, once for the 1099DIV and once for the 1099R, but H&R copied all statements twice). Once I followed your instructions to delete and start again, then I manually entered the 1099R data, everything tallied.
Once additional note – In Pennsylvania, you’ll need to manually correct the adjusted basis. The H&R software prompts you; if you don’t complete correctly, you’ll see your state taxes owed jump.
Nikhil Kothari says
I spent an hour. H & R software was showing $330 (6%) penalty. Finally, I searched the web and came across your screenshots. They are accurate and they work. Thanks very much
Prasad Ram says
Hi Harry,
Your article is the clearest out there and have been referencing it for the past couple of years when entering my taxes. My question is on how to report the removal of excess contribution. I by mistake made the $5500 contribution twice in 2018 and converted both of them from IRA to Roth IRA. I realized this last month and had fidelity remove the excess contribution from Roth IRA. But there was a gain/earning of $427 during that period. The 1099-R that I received earlier has $11000 in gross distribution and taxable amount boxes. How do I report the removal of excess contribution in 2018 H&R Block 2018? Please help if you can.
Gearhead says
Awesome, clear, succinct advice!!! I don’t think I would’ve gotten this right without your post. Thank you!
Jim says
YOU ARE AWESOME! This helped me soooo much and I learned in the past to do this the easy way as you explain, but walking us through step by step on how to properly enter this in H&R block software was a HUGE help. Thank you so much!
Alan Greer says
Thanks very much for this. I contributed $13k easy way and converted it all. I received a combined 1099-R for me and my wife. The software is current reflecting half ($6,500) as taxable. Any ideas?
Harry Sit says
IRAs are all in individual names. Never heard of a combined 1099-R for two people. Either take a closer look at the forms you received or contact the IRA provider and ask why they didn’t issue a separate 1099-R for each person.
Jpohn says
Wow! It worked following your steps exactly. There is no way I would have figured how to report the backdoor Roth on the HR Block Software. Thanks so much for sharing and including screenshots. Awesome! GOD Bless your efforts
Garrett says
Does anyone know to fix things, if you converted to Roth IRA (accidentally), had to recharacterize it to Trad IRA, and do a backdoor conversion of that recharacterized Trad IRA to a backdoor IRA?
Sue says
I started out this adventure by realizing that I needed to recharacterize my ROTH over contribution and reading about backdoor ROTH here. I think I did it all wrong and now my 8606 is not what I expected. Any advice or insight would be extremely appreciated. Below are the details.
3/22/19: SEP & pre-tax IRA conversions to Roth IRA completed ($1,426)
April 2019: Due to income limitations, Roth recharacterization for tax year 2018 to Traditional IRA. Form 8606 filed for post-tax portion. NIA (net income attributable) amount is also in that IRA.
At the end of 2019, there is 1 remaining Traditional IRA account that holds post-tax and a small amount of taxable (from NIA and earnings) money. Yes, I failed to convert it to a ROTH in 2019.
Roth IRA: 2019 Conversion from 2 IRA Accounts: $1,426 (not taxable going forward)
Traditional IRA:
Recharacterization $3,720 (post-tax)
NIA $163.16 (taxable)
Earnings $55.19 (taxable)
April 2020: Roth recharacterization. The original $6,000 Roth contribution for 2019 was made on 1/2/19 before I was aware that I was starting to hit the contribution ceiling. So this year, I will need to recharacterize $4,240 plus the NIA.
I expected the full $1,426 amount from the pre-tax IRA conversion in March 2019 to be fully taxable (line 4a of 1040) for 2019, but the H&R Block 2019 software I am using is showing $874 of it as taxable and the remaining $552 is used to reduce the basis of the post-tax amount in the Traditional IRA where the recharacterized money was moved (via completion of Form 8606).
At the end of the day, I think it is sort of a wash. What confuses me is why the tax on the $552 would be deferred (since ultimately, it increases the taxable portion of the Traditional IRA).
Sue says
Mr. Sit,
I realize my situation above is a little convoluted, but do you know why H&R block is reducing the basis of my post-tax instead of just fully taxing me on my pre-tax IRA conversion? Is this right? I tried calling H&R block, but all they can tell me is to update the software which is of no help. Thanks, Sue
Rob says
OK, I know you said “You do yourself a big favor and avoid a lot of confusion by doing your contribution for the current year and finish your conversion during the same year. Don’t wait until the following year to contribute for the previous year.” But I did it before I read it. So did it in early January so didn’t get any official tax document on the contribution or conversion. If I enter everything per you guidance, says I can’t file electronically. So still think I am doing something wrong. Or should I submit with out the 1099 & 8606 and send those in later?
Richard says
Thanks this is exactly what I needed. The online help was useless.
Chunkai says
Hi,
Thanks so much for this awesome guide! It really helps a lot.
I’m still preparing my 2019 tax return (I’ve postponed it) using H&R Block and got some issue on filling my backdoor conversion data.
So I’ve done a backdoor conversion in 2019. It’s my first year having IRA account and I don’t have any other traditional IRA basis. I deposited 6000 to my traditional IRA and then converted all of it to my Roth IRA one day after that. And it is until recently that I found out my MAGI is lower than the deduction limits. But I’ve already done the backdoor conversion and I’m happy to stick to that and make it non-deductible contribution. However when I follow your steps, the software just automatically mark my traditional IRA as deductible and the didn’t fill in any information in part 1 of form 8606.
Could you give me some advice how could I deal with this case?
Thanks a lot!
Harry Sit says
If you go with the output of the software, your IRA contribution is deductible and your Roth conversion is taxable. The deduction offsets the taxable conversion. You end up in the same bottom line as making the contribution non-deductible and not pay tax on that part of the conversion. You can try to override the software and make it do it your way, but because the end result is the same, maybe just go with how the software does it now.
Chunkai says
Hi Harry,
Thanks so much for your reply, and yes I think your suggestion is simpler and better!
Just want to confirm that my Forms were correctly generated: if I let my contribution to traditional IRA as deductible and then have the conversion to Roth IRA as taxable, I will have:
on Form 1040: box 4a, 4b, 8a, and Schedule1 box 19 all filled with 6000. (I don’t have other adjustment items)
on Form 8606: Part 1 left blanked. Part 2 box 16 and 18 both filled with 6000.
That would correctly make my conversion taxable, right? Have I missed any of the related boxes?
Harry Sit says
That’s correct. Line 4b makes the conversion taxable (which copies from Form 8606 line 18). Line 8a takes the deduction for the contribution (which copies from Schedule 1). 4b adds to income. 8a subtracts from income. You should also have it on Schedule 1 line 22, which is the sum total of lines 10-21.
Chunkai says
Hi Harry,
Got it! I was confused about many IRA-related questions asked on H&R Block and afraid that I might put wrong numbers in some of the fields.
Thanks so much for all your help! Really appreciate it!
Dan Blackledge says
Thank you, Finance Buff.
You saved me 20 minutes on hold from the whistling H&R Block cuckoo bird song.
Deleting saved forms…who knew? Certainly not their help system.
Dan B
DoctorO says
Thanks for this helpful post! One question about earnings: I accidentally contributed $6k directly into my Roth IRA in January 2020, and made $2k in earnings in my Roth before I recharacterized the $6k + $2k earnings into a traditional IRA this month. When I reconvert these back into my Roth IRA, do I have to pay tax on the $2k in earnings from the initial Roth contribution? I don’t have additional earnings from when my money was parked in my traditional IRA. Thanks!
Harry Sit says
You have to pay tax on the $2k in earnings transferred from your Roth IRA to your traditional IRA when you recharacterized. Recharacterizing makes it as if you originally contributed to the traditional IRA. The $2k would’ve been earned there.
Jessica Boyd says
Thank you for this post. I unfortunately contributed to Roth in 2019 then recharacterized and then did the backdoor conversion in 2020. I received 1099s for both the Roth and traditional IRA accounts. Why in this scenario do you indicate to skip over the first set of instructions that has you record the 1099 activity in the tax software and start with the Non-Deductible Contribution to Traditional IRA section? Thanks again.
Harry Sit says
“If you only contributed for the year in question but didn’t convert until the following year, skip all the way to the next section …” The year in question now is 2020. If someone contributed for 2020 in 2021 and converted in 2021, they should skip over the first section when they do their 2020 tax return. You would’ve skipped the first section when you did your 2019 tax return last year. You shouldn’t skip again now for your 2020 return.
SATYA SWAROOP says
Guide me on this please.
I had my old 401k rolled over to traditional IRA in 2020. I was also contributing to my Roth IRAs. I then converted my rolled over IRA to Roth IRA in 2020
On my spouse, I had originally contributed for 2020 in Traditional IRA, and then converted the whole Traditional IRA to Roth IRA.
How do I go about with this.
MFMeow says
Thank you! This was my first year doing a backdoor Roth and I was perplexed; was unclear on the “Do you have a recharacterization?” question. Your very clear instructions were exactly what I needed. Appreciate the advice.
dac says
I used the instructions above and the backdoor Roth is now reported correctly on my federal return, but it’s still showing as taxable on my state return (Massachusetts). What am I missing? How do I adjust this in the H&R block software so it’s not reported as a taxable IRA distribution on the state return?
Harry Sit says
You probably need to enter somewhere in the state Q&A to say how much of the distribution was contributions already taxed by MA.
“For Massachusetts purposes however, distributions made are excluded from gross income if these distributions equal your Massachusetts previously taxed contributions.”
https://www.mass.gov/service-details/view-non-government-pensions
Anthony Grover says
Extremely helpful article but I still have a major issue. Scenario: Both my wife and I contributed $14K to new traditional IRAs in 2020 (including $7K each for 2019). Additionally my wife had a $2909 IRA she rolled into her new IRA. We then converted the totals for both traditional IRAs to Roths (my $14K and her $16,909). The software went back to our 2019 return and retroactively added the total of $14K for that year (which we paid in 2020). Strange but true (2019 Forms 8606 show $7K contributions for each) and helpful for this year. My problem is this: after working through your process, $9909 of our total $30,909 IRA distributions still show as taxable income. The $2909 rolled over, and another $7K assigned to either me (age 62) or my wife (age 57). IRA contribution results follow: Traditional IRA contributions – $7K for both of us. Traditional IRA deductions – $7K for wife, $0 for me. Any suggestions for how I can solve this incorrect taxable income assignment would be greatly appreciated.
Harry Sit says
If your income allows your wife to get a tax deduction for her IRA contribution because she’s not an active participant in a workplace retirement plan, the $7,000 deduction will offset the $9,909 taxable income, making you pay tax on net $2,909. The bottom line is the same as making the contribution non-deductible and only pay tax on the $2,909 converted to Roth.
Shawn says
Hi Harry, here’s my situation-
-I began contributing to my roth IRA in 2020 ($1,200). I realized I would have come close to the income threshold for roth contributions, so I recharacterized this amount to a new traditional IRA I opened (did not have a traditional IRA prior to this). The value of the $1,200 was ~$980 by the time I recharacterized to the traditional IRA, so I do not have to pay any taxes on gains.
-I maxed out the remaining 2020 contribution of $4,800 to my traditional IRA (kept it all in cash to avoid any gains) and then converted the entire amount of $5,780 ($4,800 + $980) to my roth IRA.
-I subsequently rolled over an old 401k to the traditional IRA.
-I entered the 3 1099-R’s (recharacterization of 980, conversion of 5,780, and rollover) correctly. I then filled in the IRA contributions (1,200 roth IRA contributions which I recharacterized to traditional, 4,800 traditional IRA contribution). I followed your steps and correctly entered the in the conversion. I believe I also entered the roth recharacterization correctly.
However, my 2020 contribution of $6,000 appears as a deductible traditional IRA contribution. The issue could be that I’m using the online version? Is there a way to manually fill out form 8606 so that the system knows that the amount is non-deductible? Thanks in advance for your help – much appreciated.
Harry Sit says
Did you already enter your income (see the heading ‘W-2 Box 13’)? If the software sees your income as under the limit for taking a deduction, it’s going to make your traditional IRA contribution deductible. Did you also enter your year-end IRA balance because you rolled over an old 401k to the traditional IRA? Having a balance at the end of the year triggers the pro-rata rule. It makes your conversion partially taxable even when your contribution was non-deductible.
Shawn says
Thanks for the prompt reply, Harry.
I already entered my income. I think the system is deducting the traditional IRA contribution because box 13 (retirement plan) is unchecked on my W-2. My employer does not have a 401k plan. We do, however, have a discretionary profit sharing plan, in which the employer makes discretionary contributions at year-end to a retirement account. If profit sharing plans do not count as employer retirement plans, I suppose I can take the full IRA deduction? Note – I’m a single filer.
Thank you for pointing out the pro-rata rule. It looks like I made a mistake by rolling over the old 401k into the traditional IRA. Do you know how I would calculate the total basis in the traditional IRA? Would it just be the total contributions that I made to 401k (excluding any gains earned on the contributions)? For example, if I contributed 25,000 to the 401k and rolled over 30,000 (5,000 being investment gains), would the total basis in the traditional IRA be 25,000? I really appreciate your help – struggling with this.
Harry Sit says
Profit sharing plans count as employer retirement plans. If you receive a contribution for plan year 2020, you’re considered an active participant.
https://www.irs.gov/retirement-plans/are-you-covered-by-an-employers-retirement-plan
Basis refers to after-tax contributions. If your old 401k only had pre-tax contributions, your basis in the $30k rollover is zero.
Shawn says
Got it – thank you. I guess my employer made a mistake on the W-2 by keeping section 13 unchecked? Am I required to have them anend this?
Harry Sit says
You can ask them why it wasn’t checked. Maybe when they generated the W-2, the employer hasn’t made the contribution for 2020 yet. Have they already made the contribution by now or made any announcement on whether they will make a contribution? If they decide to skip it in 2020, you’re not an active participant. If you’re an active participant but the employer doesn’t show it on the W-2, you still have to represent on your tax return truthfully that you’re an active participant.
Shawn says
A coworker told me that employees only begin receiving contributions to the profit sharing plan after serving x amount of years at the firm. I will have to confirm this.
If I am considered an active participant, I will not be able to deduct the 6,000 IRA contribution. I will then have to pay taxes on 80% of the 6,000 (6,000 non-deductible contribution / 30,000 IRA value), and file form 8606 to show this. Note, I do not have any other trad IRA accounts. Is my understanding correct for this scenario?
If I am NOT considered an active participant, I WILL be able to deduct the 6,000 IRA contribution. I then have to pay taxes on the entire 6,000 I converted to my roth IRA. Would I still need to file form 8606, considering I would not be making a non-deductible IRA contribution for the year?
Thank you again for your help! You’re a life saver.
Harry Sit says
Definitely find out whether you’re eligible to receive discretionary profit sharing for 2020.
You can see the effect in the software by checking and not checking W-2 box 13. If you’re covered by a retirement plan, your $6,000 contribution is non-deductible, and 1/6 of the conversion is from after-tax dollars: $6,000 / ($6,000 + $30,000). You pay tax on $5,000. Your remaining $30,000 is now $5,000 after-tax, $25,000 pre-tax. If you’re not covered by a retirement plan, you get a deduction for your $6,000 contribution, and you pay tax on your $6,000 conversion. The two offset each other. You don’t pay any extra tax.
Either way Form 8606 will be needed because you converted but the software will take care of it.
Devin says
Hi Harry,
Great article, very helpful! I am married filing separately (due to the Income Based Repayment method on student loans) and just completed my 2020 taxes yesterday via HR Block’s online Deluxe package.
In my case, I have backdoor Roth IRA setup at Edward Jones such that twice a month I auto-deposit money into a Traditional IRA, and that money is then converted to a Roth IRA a day or two later. At the end of 2020, the balance in the Traditional IRA was $0.
Per your article, when doing my 2020 taxes, I first reported the 1099-R info regarding the Traditional IRA distributions, which went fine. The amount on the 1099-R form ($5000) then showed as income.
However, in the Adjustments section, the “nondeductible contributions” field was greyed out as $0. I could not edit this amount. Per some of your responses to other comments, I gather this is because I don’t have an employer plan? I would still think that I made nondeductible contributions since I have no need to claim a deduction due to converting those funds to the Roth IRA, but I guess this is just how the IRS does it? Or maybe just how HR Block does it?
That being said, the $5000 now shows as an adjustment (deducted from total income), so basically I am not being taxed on it. It was added as income, then subtracted as an adjustment. As long as I’m not paying taxes on it, I’m fine with it, but I wanted to make sure that this is the legitimate way to do it for my situation, and that it will be okay with the IRS.
FYI, when I downloaded my forms after completing my taxes, Form 8606 only shows Part 2 completed. Line 16 = $5000. Line 17 = $0. Line 18 = $5000.
And on Form 1040, Line 4a = $0. Line 4b = $5000.
Thank you!
Harry Sit says
That’s just how the software does it. If you qualify for an adjustment (“above-the-line deduction”), it’s going to make you take it even though the bottom line is the same. Please note when you’re married filing separately, you’re eligible for the adjustment only when both of you aren’t an active participant in a workplace retirement plan. If that’s not the case, when you tell the software your spouse has an employer retirement plan, the software will make your IRA contribution not deductible.
jcs94 says
Any chance we could get one of these guides for CreditKarma? (Ideally this year, but if not this year then can I put in a request for next year haha.)
Thanks!
Harry Sit says
Sorry, I’m not willing to give my SSN to Credit Karma. Use FreeTaxUSA if you want an inexpensive online service.
jcs94 says
I believe you can just type random numbers into the SSN field for CreditKarma, I’ve done that once when I wanted to simulate taxes in a different state when I was considering a new job.
Mike C says
Extremely helpful, thanks.
Raj says
Best walk through article on the internet. Comprehensive, clear, and well explained. This is my golden reference every year, especially when slightly different cases pop up. Thank you!
Randy says
Thanks so much for writing this article, it’s helped me a ton. I do have a question since my contribution and conversion years are out of sync. Can you see where I’ve gone wrong?
In 2020, I contributed $12,000 total to my traditional IRA ($6k for 2019, $6k for 2020) and also did the backdoor conversion to Roth for that $12,000 ($6k for 2019 Roth, $6k for 2020 Roth). My Traditional IRA balance at the end of 2020 was $0.
For 2019 taxes, I filed the $6,000 IRA contribution (made in 2020) that I put towards 2019. I did NOT file anything for the backdoor Roth conversion since that conversion happened in 2020. My basis on Form 8606 (line 14) was $6000. So far so good?
For 2020 taxes, my 1099-R shows $12,000, which, if I understand this form correctly, is the amount that left my IRA (distributions) and was converted to my Roth in 2020.
In the “Non-Deductible Contribution to Traditional IRA” section, I put
– $6,000 as my ‘Traditional IRA contribution’ (contribution made in 2020 for 2020 IRA)
– NO for ‘Recharacterization’
– $6000 for ‘Total Basis’ from 2019 8606 form (contribution made in 2020 for 2019 IRA)
Is this correct? I don’t put all $12,000 for my ‘Traditional IRA contribution’, do I? Even though all $12k was contributed in 2020, I already reported $6000 of it in 2019 taxes since that $6k amount was contributed in March 2020 (prior to tax deadline).
Then the other question is in ‘Let us Know if you Converted your IRAs’. Do I put NO for this since in 2020 I did a backdoor for my 2019 Roth? But then the follow up questions it asks me makes no sense since all my values are $0.
– I did not make any contributions to my IRA in 2021
– My outstanding rollovers is 0
– Value of IRAs is 0.
I think I’m doing something wrong but I can’t figure out what. I feel like I didn’t get to the “difficult” part of being out of sync between contribution and conversion. I can’t figure out where I’m declaring that I did the 2019 Roth Conversion in 2020. Also, when it asks for my IRA contributions for 2020, do I put all $12,000? Or do I only report $6000.
Thanks!
Harry Sit says
$6,000 basis from 2019 plus $6,000 contribution for 2020 is correct. Follow the screens in this post for the rest.
John Edwards says
Hi Harry, I contributed $6K to traditional IRA, then converted to Roth IRA. During the conversion I paid $800 in federal taxes and $200 in state taxes. This resulted in 2 1099-R statements. One 1099-R shows $5K as gross distribution and income with Distribution code “2” and the other shows $1K as gross distribution and income with Distribution code “1”. I followed your instructions for the first 1099-R but it is not clear how to tackle the second one, with distribution code “1” (this distribution went all towards federal and state taxes). My Roth IRA account has $5k, as I paid $1K in taxes. Please help.
Thanks, John
Harry Sit says
I tried it in my software. You enter the second 1099-R as-is with the numbers in the respective boxes and the distribution code ‘1’ in box 7. You answer the questions in the same way until it asks “Did you convert your distribution?” You answer ‘No’ there because the $1,000 didn’t go into your Roth IRA. Everything else follows the same way.
If your $6,000 contributions weren’t deductible, you shouldn’t have elected to have taxes withheld when you converted. Since you did, you’ll get the $800 and $200 back as a tax refund from the IRS and your state. It’s as if you only contributed $5,000 and converted $5,000. It’s not ideal but it’s not the end of the world either. Just remember to choose no tax withholding when you convert next time.
JM says
What is the procedure for just converting partial amount from traditional IRA into a Roth (and no contribution for the year)? Is it above? I followed along but my refund went down alot (ie, did not come back up) but i think that is because of the no contribution? I am using last year’ software to mimic how much I can convert this year without changing brackets.
Thanks
Harry Sit says
Because a straight conversion is taxable, it’s normal to see the refund going down unless you have existing nondeductible contributions in the IRA. The process is the same as the first part of this post under “Convert Traditional IRA to Roth.”
JM says
Do you know what boxes are applicable and their entries on the 1099-R would be for this conversion?
Harry Sit says
I have a screenshot of the applicable boxes in the post: 1, 2a, 2b, 7 (code 2, IRA box checked).
JM says
I thought that was for a back door and the money i am converting has been in the traditional for a long time. I am not contributing to the traditional any more and am beginning this year to convert the monies to a new Roth.
Harry Sit says
The 1099-R looks the same. The IRA custodian doesn’t know whether you took deduction or not.
Al says
I have an uncommon 401K backdoor contribution question. Can you tell me how to enter the following into HR Block. The transaction include an after tax 401K in plan conversion in November. Then my company decided to change investment houses, so I wanted to stay with the original investment house so I transferred most of my money from the 401K to personal IRA with the original investment house. (a direct transfer from 401K to IRA) I left some money in the 401K so that the accounts did not get closed.
I am older than 61.
I contributed 8000 in after tax money to my 401K IRA (non-Roth) in 2021.
In Nov 2021 did an in-plan conversion of 4000 from that IRA to Roth. (details show 200 taxable).
Here is a summary of the conversion and transfers.
November: in-plan conversion of After Tax to Roth: 4000 (transfer shows $200 taxable).
December:
After Tax Money moved from 401K to Roth IRA: 2000 (transfer shows $0 taxable)
Pre Tax Money moved from the 401K to IRA (non-Roth): 5000 (transfer shows $0 taxable)
Roth 401K money moved to IRA Roth: 6500. (transfer shows $0 taxable)
I received 2 1099Rs:
1099-r #1: Roth Transfer has Box 1 and 5 set to 6500, code H. (This presents little difficulty)
1099-r #2: Box 1 is 11,000, Box 2 is 200 Box 5 is 6000, code G. (excludes 5000 IRA Transfer)
Harry Sit says
Your transactions were all from a 401k. They’re unrelated to the topic in this post, but this other post should help: How To Enter Mega Backdoor Roth In H&R Block Tax Software.
Before you follow the steps there, break your $11,000 1099-R into two. One with $5,000 in box 1 and $0 in box 2, and $0 in box 5 for the pre-tax to pre-tax rollover. This should be straightforward with $0 tax. Follow the steps in the mega backdoor Roth post with the second one with $6,000 in box 1, $200 in box 2, and $6,000 in box 5.
Pat says
Hi,
Thanks for all the great information here. I am doing my taxes for 2021. What should I put in my Traditional IRA basis for 2021 if I contributed $5600 in a traditional ira in 2020 then converted all of it into a roth ira subsequently on the same year (2020)? In line 14 on my 2020 8606 form, the amount is $5600. So would my basis be for my traditional ira then be $5600 (as this was the amount that I have on line 14 of my 2020 8606 form), or 0, since I converted/recharacterized the whole amount to a roth ira? thanks in advance.
sean says
For your case, “basis” is ‘0’ since you already converted to ROTH IRA – you have a clean slate. If you didn’t convert and you left your $5600 in traditional and you contributed again $x for 2021, then converted the whole amount $5600 + $x to ROTH in 2021, your basis would have been $5600.
Pat says
Hi again,
I am still so confused in filling up the forms using H&R block for my backdoor roth. Any help is greatly appreciated.
For 2020 tax year, contributions from roth ira worth $5600 was recharacterized to traditional ira on 02/16/2021. The traditional ira didn’t have any funds prior; on 02/18/2021, the entire rechararacterized ira was converted back to a roth ira. For tax year 2020, I submitted form 8606 to indicate the recharacterized funds of $5600 as nondeductible contributions. For tax year 2021, I received two 1099-r forms, one indicating the recharacterization in the amount of $6117, and the other form for the conversion in the amount of $6092.
It is correct to assume the following:
– The $5600 which was recharacterized in will be my basis for my traditional ira?
– For tax year 2021, I am contributing to a Roth ira and not to a traditional ira?
– This roth ira contribution was recharacterized to traditional ira and later on converted to roth ira?
– so essentially I have zero traditional ira contributions but have $6117 roth contributions?
Thanks in advance.
Pat
Harry Sit says
Your description differs from your description in the previous comment. Assuming your latest is correct, your basis in the Traditional IRA as of 12/31/2020 was $5,600. If these are the only things you did in 2021, you didn’t contribute to either Traditional or Roth IRA for 2021 in 2021. You converted $6,092. You’ll pay tax on $492. You can still contribute to either Traditional or Roth IRA for 2021 before April 18, 2022 depending on your income eligibility but that’s separate from what you described here.
Pat says
Thanks for the clarification Harry!
So, after editing my data in H&R block, the summary that shows up on my IRA contribution results show
Traditional IRA contributions 0
Traditional IRA deduction 0
Roth IRA contributions $6117
Is this correct?
Also, on Form 1040 line 4a, it should show $6092, and 4b should show $492, right?
Thanks again for your kind help!
Pat
Harry Sit says
The $6,117 Roth IRA contribution shouldn’t be there.
Pat says
That’s weird… I imported the 1099-R from Vanguard that pertains to the recharacterization of $6117 (it had the R on box 7), followed your instructions, and that is what my summary ira contributions result to. On my 1040, I don’t see that amount anywhere; it is just on form 8606. What do you think could I have done wrong? I started ‘fresh’ twice already. Thanks again,
Pat
Pat says
Ok so I started ‘fresh’ again today and this time it shows :
Traditional IRA contributions 0
Traditional IRA deduction 0
Roth IRA contributions 0
Also, the recharacterized amount of $6117 does not show on the 8606; it is the amount of $6092 that shows on line 16 of form 8606.
I finally got it right thanks to your help!
By the way, I hope you can answer this, but also in 2021, I withdrew $3000 from my ROTH IRA, and so I received another 1099-r regarding this as an early distribution. I then went on to my ROTH IRA account, and after subtracting the recharacterization, I still have a Roth basis of $12483. Now going on to H&R block, in ROTH IRA distribution section, it is asking this:
In 2017-2021, did you convert a traditional IRA or roll over an amount from a qualified retirement plan into your Roth IRA?
Yes or No
Should I answer Yes, since in 2021, I recharacterized $5600 from ROTH to traditional, then subsequently converted it back to ROTH IRA? And if I answer yes, the next question is asking me if I have any Recapture amount in Form 5329, which I don’t, so it would be 0? Or should I answer ‘No’ to this question?
Answering yes or no does not seem to make any difference on my tax return.
Again, thank you so much in your guidance.
You are of great help to a lot of people.
Pat
Harry Sit says
Glad to hear you finally figured it out. ‘Yes’ and then 0 sounds correct. It’s trying to figure out whether your Roth IRA withdrawal came from your previous contributions (Roth basis) or a conversion. The withdrawal is tax-free when your Roth basis is large enough to cover your Roth withdrawal. If you can help it, don’t withdraw from your Roth IRA before age 59-1/2. Roth IRA withdrawals before 59-1/2 get quite complicated when you have a mix of contributions and conversions.
Pat says
Thanks again Harry! Yup I will defer from withdrawing from my ROTH IRA until I’m 60 at least; these tax forms can be quite complicated and confusing!
Al says
Thank you very much for your help!
Gidget says
Thanks for this article. Every year this is a headache for me, even though I do the “clean” backdoor conversion. And every year, H&R Block changes their UI and I am in misery again LOL. I made all the selections (0 cost basis, converted all 6k, etc.) but the summary shows a $6000 deductible under IRAs, which I shouldn’t have … *sigh*
Something with 8606 isn’t generating correctly.
Harry Sit says
It sounds like you’re using H&R Block Online. The H&R Block downloaded software works as expected. If you’re too far along this year, switch next year.
Gidget says
Just find out their online 8606 form will not be available until February 16 now…
Jason says
Thank you for the article! After going through the steps above and continuing through the software’s standard questionnaire, I eventually get to a screen in the “TAXES” tab called “Tell us about any additional taxes and penalties,” and the following box is automatically checked: “Excess accumulations (not enough withdrawn) from a retirement plan, Section 457 plan, or IRA in 2021.” I am not able to uncheck the box, and the software then brings me to questions asking for “required distribution” and “amount distributed.” Is this expected?
Harry Sit says
It’s not expected. Look into why the software thinks you must withdraw from one of those accounts. Did you tell the software you recharacterized your contributions to a Roth IRA when you should’ve said you converted?
Jason says
Thank you for the reply. I followed the steps closely again and everything looks right, but the interview box that comes up later for excess accumulations is still automatically checked. I’m not sure what’s causing it. The 8606 looks accurate though.
Harry Sit says
I just tried it. Those questions aren’t related to your backdoor Roth. If you don’t have an inherited IRA and you’re not yet 72 years old, you’re not subject to the Required Minimum Distribution. You can hit “Skip” when it asks you about Excess Accumulations or you can hit Next and enter 0 for the next two questions on your Required Minimum Distribution and the amount actually distributed to you.
AR says
I have a clean backdoor Roth for spouse and myself. Have been doing this successfully at H&R block for 2 years previously and this year I’m getting an error message “Since [spouse] contributed more than $6,000 (the maximum allowed) to your Traditional IRA, we’ll add a 6% penalty to your return…” I’ve checked both the 1099-R entries and the Traditional IRA interview multiple times with no luck. I spoke to H&R Block support and they weren’t able to figure it out. Furthermore, even if I play along and say she put too much in Traditional IRA in the penalties section, it doesn’t resolve the issue. Wondering if anyone else has had issues and this may be a bug.
Harry Sit says
See the troubleshooting section. Open the IRA contribution worksheet and see why the software thinks [spouse] contributed more than $6,000 to the Traditional IRA. Sometimes your previous answers are stuck in the worksheet you no longer see in the interview.
VL says
My 1099-R
1 Gross Distribution $6000
2a Taxable amount $6000
Taxable amount not determined (X)
Total Distribution (X)
7 Distribution code 2
IRA/SEP/SIMPLE (X)
My “Total distribution” is different than yours, its checked.
Please, advice what should I do different.
VL says
After I followed my 1099R (I did Total Distribution (X) as it shows in my form):
Traditional IRA contributions 6000
Traditional IRA deduction 6000
Roth IRA contributions 0
Please, advice.
Harry Sit says
Having the Total Distribution box checked is fine. See the section on W-2 Box 13 in Troubleshooting. The software thinks your Traditional IRA contribution is deductible because you didn’t tell it you’re covered by a workplace retirement plan.
VL says
Thank you for your reply, Harry.
But my W2 Line 13 Ret. Plan IS NOT checked…
Harry Sit says
If you indeed didn’t actively participate in a workplace retirement plan, you’re all set with no issues unless you’re married and your spouse actively participated in a workplace retirement plan.
Nick Kozdras says
I’m recording my wife and my previous years’ IRA and Roth IRA histories using H&R Block Premium Online.
Tell us about any traditional IRA contributions and distributions you had before 2021.
My wife and I each contributed to an IRA in previous years, and rolled our IRAs into Roth IRAs in 2010 and 1998, respectively. Should these rollovers be entered in the “Distributions” or “Rollover of after-tax contributions” section of the “Tell us about your traditional IRA one year at a time” page?
Tell us about any Roth IRA contributions and distributions you had before 2021.
My wife and I each rolled our Traditional IRAs into Roth IRAs in 2010 and 1998, respectively. Should these rollovers be entered in the “Total conversions” or “Nontaxable converstions” section of the “Tell us about your Roth IRA one year at a time” page?
Harry Sit says
I’m not sure why you were asked for contributions and distributions one year at a time. It’s not part of the normal flow for backdoor Roth. If there was a question on whether you want H&R Block to track history for you before these, you could say no.
Gina says
Harry, would you please provide some guidance on how to handle this situation? 1) I made Roth IRA contribution of $6,000 in Jan 2021 for 2021, but I just realized my 2021 income is over the Roth limit. 2) I opened a traditional IRA account in Feb 2022 to recharacterize all 2021 Roth contribution of $6,000 and its related gains (that is the only money in my traditional IRA account). 3) I did a backdoor Roth conversion to move all balance from traditional IRA to Roth in Feb 2022.
I am thinking 2021 Non-deductible contribution should be reported on Form 8606 in 2021 tax filing. What about the recharacterization in 2022 and the backdoor Roth conversion in 2022? Do I report them in 2021 tax filing at all or will I have to come back and finish the reporting when I file 2022 tax?
I know crossing years makes tax filing/reporting much more complicated, wish I had found out about that earlier. I read through your article and all other replies, but didn’t find solutions for my exact scenario. Thank you in advance for your help.
Harry Sit says
You tell it as it was. In the IRA contribution section, you say you contributed to Roth IRA (because you did originally). When it asks you whether you recharacterized, you say yes. Come back next year to do the conversion part. See Backdoor Roth: Planned vs Unplanned.
Gina says
Thank you so very much for your reply. So, when I report the backdoor Roth conversion in my 2022 tax filing, what is my basis carried over from 2021? I think the basis should be the original contribution $6000 with gain/loss, right? I had a loss at the time of recharacterization, therefore, the actual recharacterized and converted amounted is less than my original contribution.
Also, thanks for the link of the other article. It is very helpful for my future planning.
Harry Sit says
The basis carried over is just the original contribution without any gain or loss.
Gina says
Thank you so much, Harry!
Pritha says
Hi Harry,
I have a bit of a unique situation that I don’t see mentioned yet in any of these comments and maybe covered it in another article — but for tax year 2020, I contributed an excess amount of $ 1,004 to my Roth IRA (excess contribution was made in January of 2021) not realizing I was above the income limit, so this was then rolled over to my Roth IRA for 2021 tax year. I now no longer qualify to contribute to a Roth IRA, so I am having fidelity recharacterize the $1,004 to a traditional IRA, and then I will be doing the back door conversion to the Roth IRA before the april tax deadline. I am a bit confused on how to report all of this in the H&R block software. I received a 1099R form for the excess contribution which I have uploaded. When asked which IRAs are you contributing for 2021, do I click both the Roth IRA and Traditional IRA? and then when asked about traditional IRA contribution amount do I put 4996 as that’s what I’m contributing, but then will be converted to a Roth IRA? what would be my total IRA basis? 6,000? Then I would receive a 1099 form for tax year 2022 for the backdoor conversion? Any help would be appreciated!
Harry Sit says
You check both Traditional and Roth boxes and enter them separately. You contributed $1,004 to Roth in 2021 and recharacterized. You contributed $4,996 to Traditional for 2021 in 2022. Come back next year to do the conversion you will perform in 2022. Your basis will be $6,000.
Anish says
Hi Harry,
Thank you so much for the post! I have tried following the instructions multiple times and your suggestions for troubleshooting, but whenever I put in my information, it showed Traditional IRA contributions as 6000 and Traditional IRA deduction as 6000. In addition both lines 4a and 4b show 6000. I can’t figure out where I am making the mistake. Any help would be amazing! Thanks!
Harry Sit says
Your Traditional IRA contribution is deductible when you’re not an active participant in a workplace retirement plan such as a 401k. See the section on W-2 Box 13. If you indeed don’t have a workplace retirement plan, the software did it correctly.
Arun says
Regarding “Do you have any basis in any of your traditional IRAs?”, this article says “Answer Yes because you made a nondeductible contribution to a traditional IRA.” However, I believe that this is asking about existing basis from PREVIOUS taxes years (e.g. if filing for 2021, it’s asking if you have any basis from years through 2020, NOT including 2021), if I’m not mistaken. Therefore, the answer to this question depends on that, and is not just “yes.” In fact, I imagine that most people probably do not have basis and therefore should answer “no” (in most cases, depending on your personal situation). Does this sound right?
Arun says
Follow-up: Or, more precisely, I think that the question is asking about non-deductible traditional IRA contributions that have not yet been converted (which may include the current year?). Some confirmation and clarification would be appreciated.
Harry Sit says
When you answer “Yes” you’ll still have an opportunity to say it was zero when it asks what your basis from the previous year was. You don’t want to close the door prematurely.
Arun says
@Harry Sit, but why answer “yes” and then later say $0? What’s the point?
Harry Sit says
Because that question is vague and you don’t know whether it’s asking about the previous year, the current year, including the contribution, or not including the contribution. In other words, exactly why you asked how you should answer that question.
Pritha says
Hi Harry,
Thank you so much for the response — it was very helpful. My total IRA basis for the traditional IRA would be 0 for this year correct and then 6000 for next year? As this is the first year that I am contributing to a traditional and then converting back to a Roth?
Jerry says
Hi Harry,
– I contributed $2500 to my Roth IRA in 2021. Then, later in 2021, I recharacterized the entire original contribution to my traditional IRA, along with $435 in gains.
– I then contributed $3500 to my traditional IRA and converted the entire $6435 traditional IRA balance to my Roth IRA in 2021.
– I followed your instructions for how to enter this in the downloaded H&R Block software, but the taxable amount is still coming out to almost $4000 instead of the $435.
– I notice if I put $3500 as the total IRA basis then the taxable amount is $438 which seems a lot more correct, but I never contributed to a Traditional IRA before 2021 and never had to fill out a form 8606 before.
– I have a 1099-R for the backdoor Roth conversion where the $6435 is listed as a taxable amount.
– I also have a 1099-R for the $2935 Roth to Traditional IRA recharacterization where the taxable amount is blank.
Would you happen to know what the issue is?
Jerry says
I found out the issue was I accidentally stated that my original $3500 traditional IRA contribution in 2021 was also contributed between Jan 1, 2022 – April 15, 2022 which made the taxable amount ~$3500 than it should have been.
Jared says
My wife and I each contributed $6,000 to traditional IRAs and then converted those full amounts to Roth IRAs as we have done for the last several years. Although I entered the information for each of us identically, the software is showing my full conversion as non-deductible, but is only showing my wife as having $5,800 that is non-deductible and having an amount of $200 that is deductible. I am the only earner and have a workplace retirement plan. In the past, both of our forms showed the full amount as being non-deductible. Any ideas why the software is treating our contributions/conversions differently?
Harry Sit says
When she’s not covered by a workplace retirement but you are, she has a higher income limit for taking a deduction than you do. Your joint income must have been higher than her income limit in previous years but it was slightly lower than her income limit last year. Her $200 deduction offsets the income from the conversion. It doesn’t affect your taxable income.
Khrissy Griffin says
You are amazing – I was getting so frustrated trying to get the backdoor ROTH conversion to work in HR Block. Thank you so much for the thorough walk through with screen shots and explanations!!!!
George says
Hi, in my case, the software put the same amount in line 1 of f8606 on line 4, although I did make any contributions from January 1, 2022, through April 18, 2022. All contributions ($7000) was made in last April and converted to Roth IRA. What can I do?
Harry Sit says
Do you mean you *didn’t* make any contributions from January 1, 2022, through April 18, 2022? You must have mistakenly entered your contribution as having been made in 2022 before. Answer “No” to “Did you convert all of your IRAs?” in this screen and it will reveal your mistaken entry. Delete it.
https://thefinancebuff.com/wordpress/wp-content/uploads/2022/02/hrb-bdr-14-converted-all.jpg
Tom says
Hello Harry – thanks for this article. My problem is somewhat unique in that my wife and I each made $7k contributions to a tIRA, then converted it to Roth timely in 2021, for TY2020. For 2020, my 8606 had $7k in Boxes 1, 3 and 14 only. I think that’s correct. For TY2021, I made no further contributions (I retired in 2021), and received a 1099-R for the $7k. The way I have it entered, HRB shows only values in Box 16 and 17 of $7k, and $0 taxable amount for Box 18, so at the end of the day, it’s ok. It seemed like it should have been:
Box 1 $0
Box 2 $7,000
Box 3 $7,000, And “Yes” to in 2021 did you take…or make a Roth IRA conversion
Box 4 $0
Box 5 $7,000
Boxes 8, 9, 11, 13 $7,000
Box 14 $0 (Box 15 all $0)
Box 16 and 17 $7,000
Box 18 $0
Is HRB just taking a shortcut by using only Boxes 16 and 17 or am I answering one of the HRB questions wrong?
Harry Sit says
If the 8606 still comes out that way after you followed all the steps in the “Convert Traditional IRA to Roth” section with the exception of saying you didn’t contribute to Traditional IRA in the end and a $7,000 basis from the previous year, let it be.
Tom says
Thanks again, I’ll let it be, let it be, let it be, yeah let it beeeeee. Thanks for the words of wisdom.
Lynda says
My husband and I both did backdoor Roth last year ($6K for him and $3K for me). I used the online version and we were going to owe $7K in taxes. It was throwing an error I could not fix, no matter how many tries. I downloaded the software (per your advice) and redid the entire return, following your instructions. It showed a refund of $140. Thank you so much!!!
I am still flabbergasted at how much the online and desktop versions differ…
Larry says
With no other Trad IRA, in 2021 I made a contrib to a new Trad IRA for 2020, 2021 and then immediately converted all to my Roth, for a clean backdoor Roth conversion. I’m assuming nothing is taxed.
But my spouse has an existing trad IRA. I’m hoping that’s not counted when determining owed taxes??? We file jointly. But I can’t find the answer to this. I didn’t go through H&R yet, but will soon. Thanks!
Harry Sit says
That’s correct. Each person’s IRA contribution, conversion, and balances are tracked separately. The “I” in IRA stands for Individual.
Boubazzoula says
In Feb 2021, I opened ROTH and traditioonal IRA accounts.
By mistake I put 8000 into ROTH with 1000 for 2021 and 7000 for 2020.
The same day I realized my mistake and called vanguard who did a recharacterization and put the money back in IRA, I used backdoor convertion to put the money in ROTH IRA. and later in the year I added 6000 to traditional IRA and used the backdoor convertion to get it to the ROTH IRA account. I ended up with 7000 in ROTH for 2020 and 7000 for 2021 and zero dollars in traditional IRA.
My issue is I received 2 1099R documents and I am not sure how to report this in H&RBlock. However I enter the info I end up with having to pay taxes on this money which I don’t believe is correct since the money is already taxed and my work place provides backdoorconversions.
The ROTH IRA 1099R form has in box 1 Gross Distirbution 1000, box 2a: Taxable amount: 0, Distribution Code N
While Traditional IRA 1099R form has in box 1: Gross Distribution 14000.02, box 2a: 14000.02, box 2b Taxable Amount not determined (X), Total Distribution (X), box 7: Distribution COde 2, IRA/SEP/SIMPLE (X)
Below is the statement I received from H&R Block support:
“A Roth IRA conversion is a taxable event. The amount you choose to convert will be taxed as ordinary income. You must pay income taxes on any converted funds in the year of the conversion”
I believe this isn’ correct for backdoor conversions, I know taxes are owed on the growth of money in the Traditional IRA if/when converted but this isn’t my case.
First the money I am using was already taxed, second there is no growth and I am using the backdoor.
Would you please help me find the best way to report this.
Thank you
Harry Sit says
You recharacterized a 2020 contribution, which should’ve created a basis on your 2020 return, to be carried over to 2021. When it asks you about your total IRA basis, enter $7,000. All the other steps should be the same as in this post. The $7,000 basis plus the 2021 contribution of $7,000 offsets the $14,000 distribution.
Burak says
Thank you very much for the clear step by step description of this process. I was very stressed about how to handle this in my tax returns since this was my first time doing the backdoor IRA. I can get a good night’s sleep now.
Boubazzoula says
Thank you very much for all the explanations Harry!!!
Freda S says
I want to echo every single person in your comments who thanks you for your clear and follow-able explanations for the backdoor Roth using H&R Block. I was completely flummoxed earlier this year, took an extension, was flummoxed again – until i found your website and your section on this. Saved my financial sanity, Harry – thank you!! And now I’m a subscriber and am happy to get your advice all year long.
George S says
Here’s a heads up. I tried to complete the backdoor Roth BEFORE I entered my solo self-employed 401k data. No matter what I tried, the traditional IRA was listed as pretax and my 1040 line 4b listed my conversion as taxable. When I received my 1099 from my contractual position, I will try again. This will be after I list my 1099 income and list my 401k donation. Does this sound correct?
Harry Sit says
That’s correct. If your income isn’t high enough or you don’t show that you’re covered by a retirement plan, your Traditional IRA contribution is deductible. The software will make you take the deduction.
Tyler says
Hello! First off, thank you for all of your help. Is there a place to help support you? I have a tax question I am hoping you can help me figure out. I recharacterized my 2021 contribution of 6279.62 in February of 2022. I also contributed and immediately converted my 2022 contribution in the same month. I now have two 1099-R forms. One for the traditional IRA that 12279.32 in boxes 1 and 2a plus another form for the roth IRA that has just the 6279.62. How do I file this? Is this where entering the basis of 6000 comes into play? Thank you!
Harry Sit says
You enter the 1099-R for the Roth IRA as-is. The code in Box 7 tells the software it isn’t taxable. You enter the 1099-R for the traditional IRA in the same way as in this post except when it asks you about your basis from the previous year, you answer $6,000 instead of 0.
doyle says
I’ve been using these instructions for several years and it’s been very helpful. Thank you.
B WO says
Thanks for updating again. I’m sure I will be using this guide as long as you update it and so long as this is allowed.
Sharath says
is the hrblock 2023 (2022 tax return) software good to use. i have seen lot of reviews saying it has issues, is slow and errors. i always use the online software but was wondering if the download verison will help me better both price wise and ease of use? any advise. thanks
Sharath says
also thank you for this amazing, amazing blog. your insight here is the reason I am thinking about switching to software version after doing it online all these years.
Harry Sit says
Downloaded software works better than online software. The H&R Block downloaded software doesn’t cover some corner cases but its online software likely doesn’t cover those either. The software isn’t slow. It’s easy to use.
Sharath says
thank you very much!!
i am sorry what do you mean corner case
Sharath says
got it, thanks a bunch!!!
Sharath says
got it, thanks a bunch!!
Sharath says
thank you very much!!
i am sorry what do you mean corner cases?
Harry Sit says
Situations that affect only a small percentage of people, such as having more than $20,000 in foreign sourced dividends or deducting interest on a mortgage above $750,000.
pw says
I am having problem getting the right numbers for form 8606 using H&R online
Background: I contributed in 2022 for 2021 and 2022 (both converted right away).
On the 1099 G section, am I suppose to be 12000 or 6000?
Other things I did during the deduction section
Page 1: checked converted traditional IRA and contributed to Roth IRA
Page 2: Total 2022 IRA contribution, I put 6000 and check off cover by employer retirement plan
Page 3: Left withdrawn blank
Page 4: Total value of trad IR as of 12/31/22 was 0.55, so system forced me to click did not convert all trad IRA accounts
Page 5: No to recharacterize
Page 6: Traditional IRA contribution before 2022: Put 6000 for total and fed nondeductible for 2021 year
Page 7: No to excess trad IRA contribution in prior years (I don’t see form 5329 in previous return)
Page 8: total IRA basis, I put 0
Page 9: Roth contribution: I put 0 as everything was converted
Page 10: Roth IRA value as of 12/31/22: I put 12000 taken from form 5498
Page 11: no to recharacterize roth ira
Page 12: left blank for roth IRA contribution and distribution before 2022
Page 13: IRA basis as of 12/31/2021: 0 for contribution and conversions
End result form 8606: taxable amount 6000
Line 1, 3, 5, 13, 17, 18 is 6000
Line 2 is 0
Line 4 is blank
Line 16 is 12000
Please help. Thanks
Harry Sit says
The amount for the 1099-R section should match the actual 1099-R you received. It should be $12,000 if that’s what the form shows.
> Page 8: total IRA basis, I put 0
This should be $6,000.
pw says
Thanks. I think that fixed the problem. At least just taxable amount of $1. Do I need to do any adjustments for last year’s taxes?
Harry Sit says
If you didn’t include a Form 8606 last year, you can find the prior-year form on the IRS website. Fill it out and sign it. It only needs $6,000 on Lines 1, 3, and 14. Attach a letter to say you forgot to include it and it doesn’t change your 2021 taxes. The mailing address is on the last page of Form 1040 instructions.
Liana says
Hi, ,my husband and I did a backdoor contribution for 2022, where we each made a $6,000 traditional IRA contribution in calendar year 2022, but it wasn’t converted to the Roth IRA until April 2023 prior to the end of the tax year. I followed your steps in our HR Block software, and it all matched up until I got to your Pro-Rata Rule section. For me in the software it just it just says it finished out 8606. I’m concerned it’s not complete because it didn’t even ask about converting it to a Roth IRA. We just said that we made the $6,000 contribution, it wasn’t recharacterized, and we had a zero basis.
Harry Sit says
If you didn’t convert in 2022, that’s the end of it. You report the conversion next year but you’ll have some confusion at that time. Do everything in one year next time. Contribute for 2023 in 2023 and convert in 2023. Contribute for 2024 in 2024 and convert in 2024.
Liana says
God bless you you sweet tax advising angel!
Randy says
This guide is so incredibly helpful, thanks so much for this! I had a clarifying question about my backdoor Roth entry in HRBlock.
I did a clean backdoor roth in 2022: contribution and conversion in 2022. I received my 1099-R form and followed your HRBlock instructions just fine.
But my wife didn’t contribute to her 2022 IRA until March 2023, and did the backdoor conversion around the same time. So, she got no 1099-R form because the conversion happened in 2023.
So when filling out her numbers in HRBlock, after it asks about her 2022 IRA Contributions ($6000), it does not ask me about any distributions. Is that because HRBlock software does not see any 1099-R form for her uploaded in the system?
At the end of the IRA Deductions I see this below. Is that right? Should both our numbers look the same?
ME WIFE
Traditional IRA Contributions 6000 6000
Traditional IRA Deduction 0 0
Roth IRA contributions 0 0
I am aware that for next years taxes I will have to account for her 2022 conversion happening in 2023, and I will make sure that she gets all caught up. But just wanted to make sure that my numbers look good.
Thanks!
Harry Sit says
The numbers should be the same for the two of you in the contributions part. The difference is only in the conversion part. You did it in 2022. Your wife didn’t.
VA says
Thanks for this info. I used these steps successfully last year with HR Block online but this year I am having an issue with HR Block online (should have purchased the software). I did a clean backdoor roth (contributed to traditional IRA then converted in 2022 for 2022). The issue I am encountering is that the software is including a $200 IRA deductible amount (probably because my spouse and I were just under the income threshold). I entered the 1099-R and entered the IRA contribution and included that I converted the full amount to a roth IRA so I’m not sure why it is attempting to give us a $200 deduction. Do you have any suggestions on what to look at that I may be missing? Thank you!
Harry Sit says
That’s fine. A corresponding taxable amount offsets the deductible amount. The bottom line ends up being the same as no deduction and no taxable amount.
VA says
That’s what I thought but the 1040 shows an IRA taxable amount of $2.00 and the adjustment to income shows a reduction of $200 for the IRA deduction so I’m not really seeing the $200 added to taxable income. Also, the IRA Deduction Worksheet item number 6 says Stop because we cannot deduct amounts contributed to an IRA but then has $200 on line 12 so I’m starting to think it could be a software issue. Thanks again for the info.
Harry Sit says
Did you lose money when you converted? Say you contributed $6,000 but by the time you converted the value dropped to $5,802? When your income is in the phase-out range, it’s possible to get a $200 deduction and have $5,800 as the non-deductible portion. When you convert $5,802, the amount above $5,800 is taxable.
VA says
No. I contributed $6000 and converted a day or two later so there was $6002 (a $2 gain). Any other thoughts?
Harry Sit says
The IRA Deduction Worksheet has two columns, one for you and one for your spouse. If it says Stop for both of you on line 6, it shouldn’t continue to line 12. Just for kicks I would increase and decrease an income item (interest or dividends for example) by $50,000 to force the worksheet to recalculate. Maybe that will make it really stop at line 6.
Vanessa Alfaro says
Thanks for the suggestion. I tried it and it did not change; the $200 IRA deduction remained. Interestingly enough, the deduction only goes away when I delete the entire 1099-R entered on the income side even though the the IRA contribution is still entered on the deduction side.
JPS says
Hi Harry, thx for uploading this helpful post – and apologies if this was already answered but wanted to share a scenario, which I’d think would be fairly common especially for high earners but can’t get seem to find a definitive answer. If you only have a single traditional IRA completely funded with non-deductible contributions over the span of many years, and then decide to perform a Roth conversion, and since earnings are taxable even with all contributions being made with after-tax dollars – how do you effectively keep track of your cost basis for future Roth conversions on this account if you decide to do Roth conversion over a period of years – for example, if I decide to perform a Roth conversion on 50% of the IRA balance based on the cost basis in year 1, then how should the cost basis be calculated for subsequent Roth conversions in the years after – assuming the balances shrink over time due to repeated yearly conversions? Reason being, it would be easiest to do a Roth conversion of the entire balance in year 1 but don’t want to take the high tax hit.
Harry Sit says
If you don’t want to take the tax hit, the best way is to roll over the bulk of the earnings to a workplace retirement plan like a 401k. Most employer plans accept incoming rollovers from IRAs. The rollover amount is assumed to have come 100% from earnings. You just make sure to still leave a small amount of earnings behind. For example, if you have $50k basis and $25k earnings in the IRA, roll over $24k to the employer plan and you’re left with $50k basis and $1k earnings. Convert $51k and pay tax on $1k.
If you don’t want to go that route and you only want to convert over multiple years, you follow the pro-rata rule that everyone talks about. Conversions are assumed to have occurred on 12/31. Add the conversion amount to the ending balance on 12/31 to come up with the pre-conversion balance. Calculate the percentage that was converted and reduce the basis proportionally. For example, suppose you had $50k basis and $25k earnings before you converted $20k. The remaining $55k grew to $60k by the end of the year. It’s assumed that you had $20k + $60k = $80k before you converted and you converted $20k / $80k = 25%. Therefore you’re left with 75% of the original $50k basis in the remaining IRA.
TurboTax makes this calculation for you. That’s why it asks about your IRA balance as of 12/31. It puts the remaining basis on Form 8606. You’ll use it when you convert again next year.
JPS says
Thanks again Harry – would you say TurboTax is better in assisting with this calculation than H&R Block? I’ve been using H&R Block for many years but it just seems as of late that it can be “lazy” with doing some of the required calculations for Roth conversions and also things like calculating the proper mortgage interest deduction since the Trump tax cuts went into effect.
Harry Sit says
It’s lazy in some areas but not this one.