TaxSlayer backdoor Roth IRA help

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sa5
Posts: 4
Joined: Thu Dec 26, 2013 10:38 pm

TaxSlayer backdoor Roth IRA help

Post by sa5 » Sun Feb 18, 2018 9:23 pm

I'm having trouble entering my backdoor Roth IRA info in TaxSlayer.

I received a 1099-R with the following info
1. 5500.55
2. 5500.55
2b. Both "Taxable amount not determined" and "Total distribution" checked
4. 0
7. 2
IRA/SEP/Simple checked

I'm able to enter the 1099-R on TaxSlayer and my tax owed increases by $1500+.

There's a section which states
"Check here if all/part of the distribution was rolled over, and enter the rollover amount."
Should I check this? If I do check this, I have to set box 2 to $0 which does not match my 1099-R form.

Next, I follow https://www.taxslayer.com/support/Knowl ... th-IRA%3F- and fill out form 8606. I've answered the TaxSlayer form questions as follows


"Total basis in traditional IRAs"
0

"Contributions made from January 1 through 4/17/2018
Be sure to also include this amount in the total contributions entered in the IRA Deductions section located in the Adjustments Menu."
5500

"Total value of all your traditional, SEP, and SIMPLE IRAs as of December 31, 2017"
0

"Outstanding rollovers"
0

"Enter Traditional IRA distributions (reported to you on form 1099-R) received during 2017.
DO NOT include rollovers, qualified charitable distributions, a one-time distribution to fund an HSA, conversions to a Roth IRA, certain returned contributions, or recharacterizations of traditional IRA contributions."
0

"Net amount converted from traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2017"
5501

"Taxable amounts from this form will NOT carry to the 1040. Any taxable amount should be entered or adjusted on your 1099-R in box 2a.
Distributions from Roth IRAs"

"Total nonqualified distributions from Roth IRAs in 2017 "
0

"Basis in Roth IRA contributions"
0

"Basis in Roth IRA conversions"
0

"Qualified first-home buyers expenses"
0

"Taxable amounts from this form will NOT carry to the 1040. Any taxable amount should be entered or adjusted on your 1099-R in box 2a."

After filling out form 8606, I expected my tax owed to decrease by $1500+ to what it was before I entered the 1099-R, but it does not change.

Am I entering something incorrectly? Thanks for any help.

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FiveK
Posts: 5818
Joined: Sun Mar 16, 2014 2:43 pm

Re: TaxSlayer backdoor Roth IRA help

Post by FiveK » Mon Feb 19, 2018 12:29 am

Based on "Taxable amounts from this form will NOT carry to the 1040. Any taxable amount should be entered or adjusted on your 1099-R in box 2a" it appears TaxSlayer wants you to put the taxable amount from Line 18 of Form 8606 (presumably $1) into box 2a of the 1099-R entry screen.

Does that give you the correct result?

clydewolf
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Joined: Tue Jul 21, 2015 12:51 pm

Re: TaxSlayer backdoor Roth IRA help

Post by clydewolf » Mon Feb 19, 2018 9:02 am

As FiveK suggests, change the 1099-R box 2a to $1. That $1 is a taxable conversion.

sa5
Posts: 4
Joined: Thu Dec 26, 2013 10:38 pm

Re: TaxSlayer backdoor Roth IRA help

Post by sa5 » Mon Feb 19, 2018 11:54 am

Thanks for the help! Entering $1 in box 2a of the 1099-R TaxSlayer form gives the correct calculation. TaxSlayer does give me the following warning message.

"We have some concerns with your Form 1099-R.
The taxable amount entered is less than the gross distribution. If this distribution was part of an annuity plan where part of the total distribution is not taxable, then please select "Continue" below.
If you rolled over all or part of the gross distribution into another qualifying plan, please select "Cancel", check the box under "Rollover or Disability" and enter the rollover amount."

My understanding though is that this is a "conversion" and not a "rollover" so I shouldn't check the rollover box and instead fill out form 8606 in the deductions section. These instructions seem to confirm. https://www.taxslayer.com/support/knowl ... language=1

It's just a bit confusing because the warning message states
"If this distribution was part of an annuity plan where part of the total distribution is not taxable, then please select "Continue" below."
which doesn't sound correct for my situation, but perhaps they just didn't mention the Traditional IRA to Roth IRA conversion scenario?

Thanks again!

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FiveK
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Re: TaxSlayer backdoor Roth IRA help

Post by FiveK » Mon Feb 19, 2018 12:20 pm

sa5 wrote:
Mon Feb 19, 2018 11:54 am
... but perhaps they just didn't mention the Traditional IRA to Roth IRA conversion scenario?
That appears to be the correct diagnosis.

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Epsilon Delta
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Joined: Thu Apr 28, 2011 7:00 pm

Re: TaxSlayer backdoor Roth IRA help

Post by Epsilon Delta » Mon Feb 19, 2018 12:55 pm

I am not sure what is going on. But I am quite certain entering a different value on form 1099-R is not the correct approach. The IRS will receive a copy of the 1099-R and you cannot edit the IRS's copy, so giving your tax software the wrong value will cause a mismatch and there is a good chance the IRS will notice.

If this is a backdoor Roth contribution the problem is almost certainly something wrong with a Form 8606. If your 2017 IRA contribution was made in 2018 and so appears on line 4 of your 2017 form 8606 then you cannot have converted this amount in 2017 so there should be a form 8606 reporting a non-deductible contribution is some prior year which should carry forward to line 2 of your 2017 form 8606. Conversely if you converted your 2017 contribution in 2017 the contribution must have been made in 2017 so should not be on line 4. Other errors are also possible,

DSInvestor
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Joined: Sat Oct 04, 2008 11:42 am

Re: TaxSlayer backdoor Roth IRA help

Post by DSInvestor » Mon Feb 19, 2018 1:09 pm

The backdoor into Roth IRA has two steps:
1) Contribution to Traditional IRA
2) Roth conversion.

The 1099-R only covers the conversion step of the backdoor into Roth IRA. Make sure you enter your Traditional IRA contribution as well. After the TIRA contribution is entered, the tax software will determine whether the contribution was deductible or non-deductible.

If deductible, the deductible amount appears in 1040 line 32. In this case, your return sees $5500 deduction and a $5500.55 taxable conversion and the two pretty much cancel each other out resulting a net increase of income of $1 (0.55 rounded up).

If non-deductible, the non-deductible amount appears in form 8606 as IRA basis and help reduce or eliminate the tax cost of conversion.
Wiki

Katietsu
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Joined: Sun Sep 22, 2013 1:48 am

Re: TaxSlayer backdoor Roth IRA help

Post by Katietsu » Mon Feb 19, 2018 6:11 pm

I am not concerned about TaxSlayer right now, but about what you did.

If you had no prior basis, converted $5501 in 2017 and made your 2017 contribution in 2018, then you DO owe taxes. This is not the way a back door Roth is to work.

So, to the OP, come back and tell us what you did.

sa5
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Joined: Thu Dec 26, 2013 10:38 pm

Re: TaxSlayer backdoor Roth IRA help

Post by sa5 » Mon Feb 19, 2018 11:28 pm

2017 was my first time using the backdoor Roth IRA.

In 2017, I contributed $5500 to a Traditional IRA at Vanguard. I didn't previously have a Traditional IRA. Several days later, still in 2017, I converted the Traditional IRA balance, which was now $5501, to my existing Roth IRA, also in Vanguard.

I have not made any Traditional or Roth IRA contributions in 2018.

setemupknockem
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Joined: Wed Feb 28, 2018 6:46 pm

Re: TaxSlayer backdoor Roth IRA help

Post by setemupknockem » Wed Feb 28, 2018 6:58 pm

Hey everyone,

Been using Taxslayer for years and I recall a similar — yet different — situations with this. I'm nearly 100% certain that my trad. to roth conversion (which I did instantly) should not have tax implications, but the tool is spitting out that it does. Changed box 2a on the 1099-R seems like the fix, but I want it to be the correct fix. I plan to reach out to Taxslayer on this.

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Duckie
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Re: TaxSlayer backdoor Roth IRA help

Post by Duckie » Wed Feb 28, 2018 8:23 pm

sa5 wrote:In 2017, I contributed $5500 to a Traditional IRA at Vanguard. I didn't previously have a Traditional IRA. Several days later, still in 2017, I converted the Traditional IRA balance, which was now $5501, to my existing Roth IRA, also in Vanguard.
You need to tell the software you made a $5500 contribution to a TIRA, that the entire contribution, $5500, was non-deductible, and that you converted $5501 to a Roth IRA. The 1099-R only reports income. You need to report the non-deductible contribution.

pipergates
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Joined: Fri Mar 16, 2018 4:37 pm

Re: TaxSlayer backdoor Roth IRA help

Post by pipergates » Fri Mar 16, 2018 4:39 pm

sorry for the double post--edited with more thoughts below.
Last edited by pipergates on Fri Mar 16, 2018 9:06 pm, edited 1 time in total.

pipergates
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Joined: Fri Mar 16, 2018 4:37 pm

Re: TaxSlayer backdoor Roth IRA help

Post by pipergates » Fri Mar 16, 2018 9:05 pm

I'm having the exact same issue with tax slayer and have the exact same numbers as OP. had no prior IRA, both contributed and converted in 2017 and gained a dollar on it before the conversion.

At first I thought 1099R 2a Vanguard should've wrote in $1 instead of 5501. But I guess they are expected to write in $5501 nowadays so they it correctly. 8606 should basically rectify the situation by fixing 1040 15B to $1 I think. However tax slayer says during the 8606 "Taxable amounts from this form will NOT carry to the 1040. Any taxable amount should be entered or adjusted on your 1099-R in box 2a."

I feel like TaxSlayer is basically I'm not going to do what I'm supposed to do and fix 15B. Instead can you go back and change 1099 2a. which will now not match up with 1099 IRS will receive so seems like a silly/unnecessary work around Tax Slayer is using.

That being said, since vanguard checks off the box "Taxable amount not determined" on 1099... maybe this acknowledges this is a fudged number to begin with by vanguard and that leaves it open to us changing it to the true taxable amount $1 and the IRS would have no issue with this as long as 15B is ultimate fixed to $1 one way or another.

Any ideas?

Maybe we should just fork up the cash and time (!) and restart with turbotax or something a little more backdoor roth friendly?

bsmith
Posts: 5
Joined: Mon Mar 09, 2015 10:57 pm

Re: TaxSlayer backdoor Roth IRA help

Post by bsmith » Thu Mar 22, 2018 10:15 pm

I'm having the same exact issue. Has anyone reached a resolution? Has Tax Slayer provided anyone a solution?

setemupknockem
Posts: 10
Joined: Wed Feb 28, 2018 6:46 pm

Re: TaxSlayer backdoor Roth IRA help

Post by setemupknockem » Fri Mar 23, 2018 8:02 am

I've used Taxslayer for 10 year and stopped this year because of this issue. I didn't like the "workaround" fix of changing the 2a box on the 1099-R. I e-mailed Taxslayer to bring up that I believe it is more of a program error and they wanted me to pay extra to be answered because it was a tax filing question. Plus $39 for State and Federal is ridiculous.

I switched over to FreeTaxUSA.com. Zero regrets. Easy to use and handled the 1099-R and 8606 no problem. Highly recommend and paid around $11 with promo code to file everything.

cheesytaxes
Posts: 1
Joined: Tue Apr 10, 2018 10:40 pm

Re: TaxSlayer backdoor Roth IRA help

Post by cheesytaxes » Tue Apr 10, 2018 10:43 pm

I had asked this question back in 2014 via the "ask a tax professional":

I understand your you concern in regard to the IRA contributions made for the 2014 tax year to a deductible IRA which was eventually converted into a ROTH IRA. Because this was a Nondeductible IRA contribution made and it was already taxed when the contribution was made, you will need to indicate that on your return by leaving the box 2a, taxable income, blank, and scroll down to box 10, indicate the appropriate amount and check the 'Rollover or Disability' box to indicate the rollover. You will do this for both 1099-R forms, and you are able to complete the return.
The form 5498 report your contributions, and you have done so correctly at this point. With reference to the form 1099-R, making the appropriate adjustments listed above will allow you to complete this section of the return correctly, and reduce your tax liability.

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