[Updated on Feb. 5, 2017 with updated screenshots from the 2016 software.]
I wrote How To Report Backdoor Roth In TurboTax some time back to help people navigate TurboTax to account for backdoor Roth on the tax return. This article shows you how to report backdoor Roth in H&R Block software. As you will see it’s actually easier to do in H&R Block software than in TurboTax.
If you use TaxACT instead, see How To Report Backdoor Roth In TaxACT.
What To Report
You report on the tax return your contribution to a traditional IRA *for* that year and your converting to Roth *during* that year.
For example when you are doing your 2016 tax return, you report the contribution you made *for* 2016, whether you actually did it in 2016 or between January and April 2017. You also report your converting to Roth *during* 2016, whether the money was contributed for 2016, 2015, or any previous years. Therefore a contribution made in 2016 for 2015 goes on the 2015 tax return. A conversion done during 2017 after you made a contribution for 2016 goes on your 2017 tax return.
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. Contribute for 2017 in 2017 and convert it before the end of 2017. This way everything is clean and neat. See Make Backdoor Roth Easy On Your Tax Return.
H&R Block Software
The screenshots below are taken from H&R Block Deluxe 2016 desktop software. If you use H&R Block Online, the screens may be similar. Here’s the scenario used in the example:
You contributed $5,500 to a traditional IRA in 2016 for 2016. Your income is too high to claim a deduction for the contribution. By the time you converted it to Roth IRA, also in 2016, the value grew to $5,530. You have no other traditional, SEP, or SIMPLE IRA after you converted your traditional IRA to Roth.
If your scenario is different, you will have to make some adjustments from 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.
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 heading “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 $5,500 to $5,530.
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 Add 1099-R here.
Just a regular 1099-R.
Enter the 1099-R exactly as you received. Pay attention to the code in Box 7 and the checkboxes. My 1099-R had Box 2b checked, code 2 in Box 7.
My 1099-R had the IRA/SEP/SIMPLE box checked.
Did not inherit.
This is a very important question. Read carefully. You converted, not rolled over.
Yes, you converted.
Did not recharacterize the conversion.
You are done with one 1099-R. Repeat the above if you have another 1099-R. Click on Finished when you are done with all the 1099-Rs.
A few more questions.
Answer yes if you contributed for the year.
After entering the Roth conversion, if you see your taxes go up a lot, don’t panic. In our test case we turned a refund of $941 into owing $995. This is normal. You haven’t entered your non-deductible contribution yet. It will come back down when you do.
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 before 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.
Click on Federal -> Adjustments. Find IRA Contributions. Click on Go To.
If you are filing a joint return, check who contributed to an IRA.
If you contributed to Traditional IRA, check the Traditional IRA boxes. If you originally contributed to 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.
No deduction due to income. Contribute anyway.
Enter your contribution amount.
This is important. Answer ‘no’ to recharacterization. You converted, not recharacterized. See the difference in Traditional and Roth IRA: Recharacterize vs Convert.
If you started fresh, enter zero. If you contributed non-deductible for previous years (regardless when), enter the number on line 14 of your Form 8606 from last year.
Some follow-up questions.
This is another important question. Read carefully. If you are doing it the easy way, as in our example, answer “Yes” — you converted all. If you are doing it the hard way in offset years — contributing for 2015 in 2016 and converting during 2016, contributing for 2016 in 2017 and converting again during 2017 — answer “No” and you will see some more questions.
Please, please, please do yourself a big favor and do it the easy way. See Make Backdoor Roth Easy On Your Tax Return.
Just a note about Form 8606. Nothing to do here.
A summary of your contributions. 0 in Traditional IRA deduction means it’s non-deductible. Repeat for your spouse if both of you did backdoor Roth.
We are done for entering the non-deductible contribution to the Traditional IRA. Now the running meter for your taxes should go back down. It was a refund of $941 when we first started. Now it’s a refund of $930 due to the tax on the extra $30 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 are taxed on the backdoor Roth.
Click on Forms on the top and open Form 1040. Click on Hide Mini WS. Scroll down to line 15.
It shows $5,530 in Roth conversion, $28 of which is taxable. The taxable income came out to $28 not $30 due to some rounding in the calculation. If you are married filing jointly and both of you did backdoor Roth, the amounts 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 of 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.
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