TurboTax and backdoor Roth IRA error?

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john4546
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Joined: Fri Dec 08, 2017 11:10 am

TurboTax and backdoor Roth IRA error?

Post by john4546 » Tue Jan 23, 2018 9:04 am

Hello everyone,

I've started my taxes for 2017 and I can't figure out why TurboTax is telling me that my backdoor Roth IRA contribution transferred from my Traditional IRA is considered to be an "excess contribution" that is subject to a penalty.

I first contributed the max $5,500.00 to my Traditional IRA (a nondeductible contribution). Then I transferred the $5,500.00 to My Roth IRA. My income exceeds the limit for a direct Roth IRA contribution (I did this over the phone with a Vanguard customer rep). I thought that the backdoor Roth IRA transfer was for those whose income exceeded the max income limit, but still permitted Roth IRA contributions using this method? If this contribution is still not allowed, can I just transfer the $5,500.00 back into my nondeductible Traditional IRA before April 15th?

Thanks for any help.

stan1
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Joined: Mon Oct 08, 2007 4:35 pm

Re: TurboTax and backdoor Roth IRA error?

Post by stan1 » Tue Jan 23, 2018 9:10 am

Did you enter the Roth as a contribution? It's a conversion from a traditional IRA to a Roth IRA, not a contribution. Enter the Traditional IRA as a contribution then do a conversion to the Roth.

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: TurboTax and backdoor Roth IRA error?

Post by livesoft » Tue Jan 23, 2018 9:15 am

Lots of folks misinterpret the interview questions in tax prep software. One wrong answer leads the program down a different path.

From this side of the internet, I cannot tell which answer of yours is wrong, but you might consult
https://thefinancebuff.com/how-to-repor ... botax.html

https://ttlc.intuit.com/questions/26881 ... y-computer
Wiki This signature message sponsored by sscritic: Learn to fish.

ryman554
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Re: TurboTax and backdoor Roth IRA error?

Post by ryman554 » Tue Jan 23, 2018 9:23 am

stan1 wrote:
Tue Jan 23, 2018 9:10 am
Did you enter the Roth as a contribution? It's a conversion from a traditional IRA to a Roth IRA, not a contribution. Enter the Traditional IRA as a contribution then do a conversion to the Roth.
That's almost undoubtedly it.

You contributed $5500 to your tIRA
You contributed $0 to your ROTH.

You converted $5500 to your ROTH from your tIRA

Your basis is the value of your tIRA as of Dec 31, 2017.

Now, go back and look at those questions again. easy to make a mistake.

stan1
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Re: TurboTax and backdoor Roth IRA error?

Post by stan1 » Tue Jan 23, 2018 9:30 am

Also be careful about downloading these types of transactions from your financial institution into TurboTax if you did that. The data provided by the financial institution is not sufficient for the tax software to know whether you did a proper conversion or made a contribution in error.

SpideyIndexer
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Joined: Thu Apr 02, 2015 10:13 pm

Re: TurboTax and backdoor Roth IRA error?

Post by SpideyIndexer » Sun Feb 18, 2018 12:40 pm

One thing that got to me this year: Even if you enter the questions in the 1099-R section correctly, TurboTax will not "know" you made nondeductible IRA contributions to a tIRA unless you first enter them in the IRA contribution section. So data must be entered both places to get the program to correctly calculate (almost) zero tax liability for a backdoor Roth contribution.

In general you need to be careful when entering data in Turbo Tax not in the sequence of its interview order. It's a bit of a hassle since you may not have all of the data when you want to start, or you may want to enter things in order of monetary importance.

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neurosphere
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Re: TurboTax and backdoor Roth IRA error?

Post by neurosphere » Sun Feb 18, 2018 12:49 pm

SpideyIndexer wrote:
Sun Feb 18, 2018 12:40 pm
In general you need to be careful when entering data in Turbo Tax not in the sequence of its interview order. It's a bit of a hassle since you may not have all of the data when you want to start, or you may want to enter things in order of monetary importance.
It took me a long to time to figure out why my software kept telling me I was not eligible for an IRA contribution while entering backdoor Roth information and trying to get my 8606 form to look like I knew it should look. I know for a fact I am eligible. Well actually, if you have not yet entered any WAGE information, the software does not think you are eligible for IRA contributions. :oops: One of the pitfalls of doing your taxes in pieces. I entered a dummy W2 and was good to go. :)

jacoavlu
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Re: TurboTax and backdoor Roth IRA error?

Post by jacoavlu » Sun Feb 18, 2018 12:58 pm

same issue here.

Bottom line, you have to first tell Turbotax you contributed to your traditional IRA (it will tell you it's non deductible), then import the 1099-R and tell Turbotax you converted to a Roth.

If you import the 1099-R first (which is what happens if you follow the step-by-step process) it wants to tax you on the conversion, even after you later tell it you contributed to your non-deductible tIRA.

SpideyIndexer
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Re: TurboTax and backdoor Roth IRA error?

Post by SpideyIndexer » Sun Feb 18, 2018 8:12 pm

jacoavlu wrote:
Sun Feb 18, 2018 12:58 pm
If you import the 1099-R first (which is what happens if you follow the step-by-step process) it wants to tax you on the conversion, even after you later tell it you contributed to your non-deductible tIRA.
That didn't happen to me. Once I entered the non-deductible tIRA contributions, that amount no longer appeared as taxable.

travellight
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Location: San Diego

Re: TurboTax and backdoor Roth IRA error?

Post by travellight » Mon Mar 26, 2018 8:29 pm

I find all of the tax software tricky in handling the back door roth ira. I have to go through many machinations to get it to look right.

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walletless
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Re: TurboTax and backdoor Roth IRA error?

Post by walletless » Sun Apr 01, 2018 11:53 pm

I've been doing my backdoor conversion since last 3 years before December 31 each year and have never run into any problems with turbo tax deluxe desktop version yet. Just submitted my federal e-file today and mailed my state returns.

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