Updated on December 30, 2018 with new screenshots from TurboTax Online 2018. If you use other tax software, see:
- How To Report Backdoor Roth In H&R Block Software
- How To Report Backdoor Roth In TaxACT
- How to Report Backdoor Roth In FreeTaxUSA
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, see Backdoor Roth: A Complete How-To.
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 tax return for year X, you report the contribution you made *for* year X, whether you actually did it during year X or between January 1 and April 15 of the following year. You also report your converting to Roth *during* year X, whether the contribution was made 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 finish your conversion in the same year. 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.
The screenshots below are from TurboTax Online. If you use TurboTax installed on your computer, the screens may be similar. Here’s the scenario we will use as an example:
You contributed $5,500 to a traditional IRA in 2018 for 2018. Your income is too high to claim a deduction for the contribution. By the time you converted it to Roth IRA, also in 2018, the value grew to $5,560. 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 TurboTax shows:
We will compare the results after we enter the backdoor Roth.
Convert Traditional IRA to Roth
The tax software works on income items first. Even though the conversion happened after the contribution, we enter the conversion first.
When you convert from Traditional IRA to Roth, you will receive a 1099-R form. Complete this section only if you converted *during* the year for which you are doing the tax return. If you only converted during the following year and you don’t have a 1099-R yet, skip this section and wait until the next year.
In our example, we assume by the time you converted, the money in the Traditional IRA had grown from $5,500 to $5,560.
As you work through the interview, you will eventually come to the point to enter the 1099-R. Select Yes, you this type of income. Import the 1099-R if you’d like. I’m choosing to type it myself.
Just the regular 1099-R.
Pay attention to the code in Box 7 and the checkboxes. My 1099-R had Box 2b checked, code 02 in Box 7 and the IRA/SEP/SIMPLE box also checked.
You get this Good News, but …
Your refund in progress drops a lot. We went from $2,590 down to $1,256. Don’t panic. It’s normal and temporary.
Didn’t inherit it.
First click on “I moved …” then click on “I converted all …”
You get a summary of your 1099-R’s. Add another if you have more than one.
Not impacted by a disaster.
No hurricane distribution either.
Choose Yes if this isn’t the first year of your doing this.
TurboTax carries over your basis from the previous year.
Enter the values at the end of the year. We don’t have anything after we converted it all.
That’s it so far on the income side. Continue with other income items. The refund in progress is still temporarily depressed. Don’t worry. It will change.
Non-Deductible Contribution to Traditional IRA
Now we enter the non-deductible contribution to a Traditional IRA *for* the year we are doing the tax return. Complete this part whether you contributed before December 31 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 year before, make sure you entered it on the previous tax return. If not, fix your previous return first.
Check the box for Traditional IRA.
Double-confirm you contributed to a Traditional IRA.
It was not a repayment of a retirement distribution.
Enter the contribution amount. If you contributed in the following year before April 15 for the previous year, enter the contribution in both boxes.
Right away our federal refund in progress went back up! It was $2,590. Now it’s $2,576. The $14 difference is for paying tax on the $60 in earnings. But we are not done yet …
This is a critical question. Answer “no.” You converted the IRA, not recharacterized or switched.
No excess contribution.
Same question we saw before. If you made non-deductible contribution for previous years, answer Yes; otherwise answer No.
Total basis through the previous year. 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.
If we converted it all, we don’t have anything left at the end of the year.
Income too high, we know. That’s why we did the backdoor Roth.
If you are using the TurboTax Free Edition, you must upgrade to Deluxe or above at this point. There’s no way to continue. FreeTaxUSA is able to do it for free.
Taxable Income from Backdoor Roth
After going through all these, would you like to see how you are taxed on the Backdoor Roth?
Look at the left hand side. Expand Tax Tools, and then click on Tools.
Click on View Tax Summary.
Look at the left hand side again. Click on Preview my 1040.
Scroll down to 1040 Postcard, Line 4. The line for IRA distributions shows $5,560. That’s the amount you converted to Roth. The line below shows $60 as the taxable amount. That’s the earning between the time you contributed to your Traditional IRA and the time you converted it to Roth. TurboTax will also generate a Form 8606 when you file, which you will be able to see after you pay the TurboTax fee.
Tah-Dah! You got money into a Roth IRA through the backdoor when you aren’t eligible for contributing to it directly. That’s why it’s called a Backdoor Roth. 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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If you followed the steps and you are not getting the expected results, here are a few things to check.
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 Tools under Tax Tools in the left pane.
Click on Delete a form.
Delete the IRA Contributions Worksheet and then confirm you’d like to delete that worksheet.
Go back to the IRA contributions part by clicking on Federal in the left pane, and then Deductions & Credits on top.
W-2 Box 13
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 IRA contribution mixed up between yourself and your spouse. If you inadvertently entered two 1099-Rs issued to you instead of one for you and one for your spouse, the second 1099-R to you will not match up with a Traditional IRA contribution made by your 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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