Here’s how to report Roth IRA conversions on your taxes

On November 21, 2022, you made a repayment of $10,000 to your traditional IRA. The value of all of your traditional, SEP, and SIMPLE IRAs as of December 31, 2022, was $50,000. You would enter $40,000 ($50,000 minus $10,000 repayment) on line 6. Section 331 also made those disasters eligible for the special tax benefits of qualified distributions in Part IV of that form. The total absence of filing can create an unnecessary tax liability. There is an opportunity to amend such an omission by later filing Form 8606 (possibly with an amended tax return).

If you have a question about the Backdoor Roth IRA and not Turbotax specifically, you should FIRST read this very in-depth Backdoor Roth IRA Tutorial before asking your question in the comments below. I promise you there is a 99% chance your question is answered there. If you’re really neurotic, and you have the downloaded version of Turbotax, you can double-check you did it right by going to Forms Mode (button in the upper left of the screen). Once there, you can click on your Form(s) 8606 to make sure you did it right. This question is asking about recharacterizations, discussed above.

What If You Fail to File Form 8606?

However, if you did have earnings between the contribution and the conversion, then they will still be taxable and will show up here. There should not be anything under the section titled Schedule 1, Line 32 IRA deduction. If you do earn too much money to contribute to a Roth IRA, there are still ways to get money into a Roth IRA. If you are unfamiliar with how a Roth account works, please read this post about the differences between Roth and Pre-Tax retirement accounts.

If you are making a prior year contribution for 2022 before the tax deadline (even though it is 2023 now), you must report the contribution as a 2022 contribution with the investment company and on your tax return. If you are married and file taxes separately, you cannot contribute to a Roth IRA, period! Well, if you earn under $10,000, you could make a partial contribution, but I don’t think you are doing much retirement savings at that income level.

Form 8606 – Reporting the Nondeductible IRA Contribution

You will report total distributions of $10,000 on Form 8606, line 19. You have no first-time homebuyer expenses reported on line 20, so you would also enter https://turbo-tax.org/ $10,000 on line 21. You will enter $6,000 ($8,000 × $7,500/$10,000) on line 25b. You will also enter $6,000 on 2022 Form 8915-F (2022 disasters), line 19.

If you earn between $129,000 and $144,000, you can contribute a pro-rated amount. If you have questions on whether Roth or Pre-Tax contributions are right for your situation, please contact us and one of our independent financial advisors will reach out to schedule a consultation. If the IRS decides that the loophole is a violation, you could owe a 6% excise tax for overfunding your Roth.

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See Overall Contribution Limit for Traditional and Roth IRAs, later. Contributions to a traditional IRA may be fully deductible, partially deductible, or completely nondeductible. As long as you didn’t have any earnings between when you contributed to your Traditional IRA and when you did your backdoor conversion to a Roth IRA, your Taxable amount should show as being zero. If you did have https://turbo-tax.org/how-to-report-backdoor-roth-in-turbotax/ earnings between the contribution and the conversion, then they’ll still be taxable and will show up here. The earlier you start saving for your retirement, the more you’ll have to work with once you’ve removed yourself from the workforce. But this can be a complicated process, which is why people use software like TurboTax to help them to keep track of their contributions and tax breaks.

Next, Turbotax will ask you the same three questions about basis and amount in the IRA at the end of the previous year that it asked at the end of the conversion section. Then, if married, Turbotax will take you back through all the same questions about your spouse from the “repayment of a retirement distribution” on down. SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset does not review the ongoing performance of any RIA/IAR, participate in the management of any user’s account by an RIA/IAR or provide advice regarding specific investments. Now, as long as you did not have any earnings between when you contributed to your Traditional IRA and when you did your backdoor conversion to a Roth IRA, your Taxable amount should be shown zero.

In particular, if Box 13 is checked, that should be indicated in the tax return software. Any qualifying self-employed retirement plan (Solo 401(k), SEP IRA, SIMPLE IRA) contributions should also be entered into the software. This requires the computation of the Schedule C to validate the correctness of the self-employment retirement contributions.

• Whether it’s a Traditional IRA, Roth IRA, or Backdoor Roth IRA, the IRS allows you to make prior-year IRA contributions up until the tax filing deadline, which is April 18th, 2023.
• But if you want to convert $7,000 to a Roth IRA, in reality, the converted amount comes from 93% pre-tax funds and only 7% after-tax funds.
• Normally, you have to pay income taxes on all money being converted from a pre-tax retirement account into a Roth IRA.
• It’s really important that if you file taxes separately you are aware of this.
• Remember you’re contributing to a traditional IRA, not a Roth IRA.

It’s your responsibility to report the non-deductible contribution to your Traditional IRA at tax time on IRS form 8606, Nondeductible IRAs. Form 8606 helps track your basis and avoid paying additional tax on your non-deductible contribution as you convert the balance to a Roth IRA. Alternatively, let’s say you have $1 million across a few IRAs and $100,000, or 10% of the total, is non-deductible contributions. If you converted $30,000, only $3,000 would be non-taxable and $27,000 would be taxable. While tax return preparation software is great, it does not replace a taxpayer’s own judgment.