Lacerte not allowing a backdoor Roth IRA

[danvirden]

When I try to enter a client's IRA contribution, for someone who is over the income threshold for a person who is a member of a retirement plan at work, Lacerte says the contribution will be Excess Contributions and says it should be withdrawn by April 15th. It doesn't allow the IRA to be a nondeductible IRA. Is there a way around this?

[qbteachmt]

How much are they trying to contribute and how old are they? Details help.

[danvirden]

They are trying to contribute $6,000 each to a traditional IRA and their income is over $300,000. she is a member of a retirement plan at work. They are is their thirties. When the same information is entered into the 2019 program, the 8606 shows the non deductible amount. This year's program says on the letter that these are excess contribution and need to be withdrawn by 4/15/2021. I had to overide the nondeductible amount to have the letter print correctly.

[rbynaker]

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@danvirden wrote:

the 8606 shows the non deductible amount.

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Do you mean "each 8606 shows the non deductible amount"?  Taxpayer and spouse will have separate forms.

[itonewbie]

Do they have only one traditional IRA each and did they have a total distribution for the conversion?

[sjrcpa]

Assuming the nondeductible contribution is the proper amount, something must be wrong with your input.

[itonewbie]

The reason is that you have made your input on Screen 24, which is for direct contribution to Roth, for which your client does not qualify.

Instead, you should make your input on Screen 13.1.  After recording the IRA distribution, you'd scroll down to the section for Form 8606 and enter the following:

• Value of all traditional/SEP/SIMPLE IRAs at 12/31/20 (plus outstanding rollovers) (-1=none); and
• Under Conversion to Roth IRA, Traditional/SEP/SIMPLE IRA distributions converted to Roth IRA