Then I deleted the imported 1099-R forms, and entered them manually for each of us. I repeated the import several times, being careful to note when TT was designating the 1099-R as mine vs my wife's. On the 1040 form, only $7000 was listed in the non-taxable column and a large portion of the other $7000 was listed in the taxable column. I completed the step-by-step prompts, and said that all of our 1099-R distributions ($7000 each) were converted to a Roth IRA account. This year first I imported our 1099-R forms from our financial institution. I have been using the Roth IRA conversion for several years and I have come to know the process and worksheets and forms. TT is not handling a second 1099-R and the conversion to Roth IRA correctly. I think there may be a bug in how TT is calculating the tax on the conversion to Roth IRA for a spouse. It is a procedure used by some to take advantage of a quirk in tax law that allows making a non-deductible contribution to a Traditional IRA when one cannot contribute to a Roth IRA, and the immediately converting the Traditional IRA to a Roth IRA, thereby getting the money into the Roth via "backdoor" tax free. "Backdoor Roth" does not exist in tax law. The non-deductible amount of your contribution will be subtracted from the taxable amount of the conversion on then 8606 form and enter on line 4a of them 1040 form and a zero taxable amount on line 4b if you did it right. If you do have prior year basis then enter the last filed 8606 line 14 value.).Įnter the 2020 year end value of your Traditional IRA a "0" (zero) - if it is in fact zero - this tax free Roth conversion will not work if it is not zero. (Usually zero unless you also made a 2019 or earlier non-deductible contribution. When asked if you have made any non-deductible contributions say " "yes" if you did then enter the non-deductible contributions made for tax years before 2020. The screen will open up with choices of where it was moved. IRA, 401(k), Pension Plan Withdrawals (1099-R).Īnswer the follow-up questions answer the question that you moved the money to another retirement. Then enter the 1099-R that shows the distribution. (DO NOT say that you moved (recharacterized) the money to a Roth) – this is a conversion, not a recharactorazition. I’ll choose what I work on (if that screen comes up),īe SURE to answer the follow up that the are choosing to make this contribution NON-DEDUCTIBLE - if that screen comes up. Otherwise the conversion will be partly taxable.įirst you must enter your Traditional IRA contributions (if there were 2020 contributions). If existing IRA's contain any before-tax money or earnings then it will be partly taxable.Ģ) The Tradition IRA contributions must be reported on a 8606 form as non-deductible.ģ) The conversion to a ROTH must be shortly after the contribution to avoid taxable gains.Ĥ) The entire Traditional IRA value must be zero that the end of the year of conversion. That "procedure" can only work of all these requirements are met:ġ) No Traditional IRA account whatsoever can exist (that includes any SEP or SIMPLE IRA accounts) at the start. The "Backdoor Roth" does not exist in tax law.
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