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Report Backdoor Roth IRA on Turbotax correctly is even harder than filling out Form 8606 by hand. The key to doing it right is to realize that you report the conversion step in the Income section and the contribution step in the Deductions and Credits section.
Since you usually start with the income section, you report the conversion before you report the contribution, even though the contribution came first. At the end, you should check the Form(s) 8606 that Turbotax makes, just like you would check a Form 8606 that an accountant filled out.
How to Report Backdoor Roth IRA on Turbotax
- Click on Forms on the top right.
- Find Form 1040 in the left navigation panel. Scroll up or down on the right to find lines 4a and 4b.
- They show a $6,200 distribution from the IRA and only $200 of the $6,200 is taxable. That’s the earning between the time you contributed to your Traditional IRA and the time you converted it to Roth.
- Tah-Dah! You got money into a Roth IRA through the backdoor when you aren’t eligible for contributing to it directly.You will pay tax on a small amount in 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.
Who Should Use TurboTax?
TurboTax makes it easy to file taxes, even if you don’t know much about tax law beyond the fact that you need to file. It does this by walking you through the process with interview-style questions and options for live, on-screen help when you need it.
TurboTax, which is made by Intuit, a company that makes software for finances, accounting, and tax preparation, is one of the most popular ways to file taxes. Its popularity comes in part from the fact that people know its name, since it has been around for nearly 40 years. It also comes from the fact that the company focuses on design and gives users a lot of options.
FAQ
Around tax time, you will receive a 1099-R showing the distribution from your Traditional IRA that was converted to your Roth IRA the previous year. You’ll also receive an informational reporting form (5498) that shows the contribution you made to the Traditional IRA and the amount that was converted to Roth.
How do you file taxes for a backdoor Roth IRA? To file taxes for your backdoor Roth IRA, fill out and file IRS Form 8606 when you file your annual tax return. This form is used for all deductible IRA contributions, IRA distributions, and IRA conversions.
Generally, Code 2 is reflected on the Form 1099-R received from the payer of the distribution for a Roth IRA conversion, where a Traditional IRA is converted to a Roth IRA. Per IRS Publication 590-A Contributions to Individual Retirement Arrangements (IRAs), page 29: Income.