Backdoor Roth Contribution

[kensuzy]

I am having trouble with the mechanics of this.  I have listed the 1099R as fully taxable.  Then showed the amount converted as fully converted in Box 5.  On B4 at the bottom of the 1099R form I have checked the box as fully converted.

I cannot get the income to go away.....it still lists it as taxable.....is there an update coming?  Or am i not doing something right?

[Just-Lisa-Now-]

Do you have non deductible basis in the IRA flowing from he 8606? If not, then its not backdoor, its a taxable IRA distribution that's been converted to a ROTH.

[qbteachmt]

"I have listed the 1099R as fully taxable."

The issuer doesn't know what was done with the funds, nor if there is basis in this or any other Trad IRA account, so they would mark it as Ordinary and Taxable or Not determined, coming from a deferred account type.

"Then showed the amount converted as fully converted in Box 5."

Was this Trustee-to-trustee? Was there no withholding?

"On B4 at the bottom of the 1099R form I have checked the box as fully converted."

Is that the only deferred amount and account owned by that person?

[kensuzy]

yes   we make too much money to have a deductible ira.  so my client made an ira non deductible ira and immediately switched it to roth.  This is the backdoor roth as is described in all of the literature.  We have done this every year in this software and it has worked....i just can't get it to work this year

[qbteachmt]

"we make too much money to have a deductible ira. so my client"

We? Your Client? We or your client? Whose tax return is this?

"made an ira non deductible ira and immediately switched it to roth."

It's a Conversion, but nontaxable, because the IRA amount already went in post-tax. As long as it was done quickly, there are no earnings to tax. As long as there are not other amounts in other deferred accounts, this is nontaxable.

Over all other accounts. Not just this one account.

"This is the backdoor roth as is described in all of the literature. We have done this every year in this software and it has worked....i just can't get it to work this year"

Read this article:

https://proconnect.intuit.com/community/individual/help/proseries-form-1099-r-faq-s/00/4853

[kensuzy]

it was marked taxable not known

it was trustee to trustee because of the way backdoor works.  You make the contribution and it is non-deductible, they give a 1099r which i put in the system.  it is rolled over to roth.  the taxpayer never sees the money.  so yes it is trustee to trustee

we have done this in all years before and it has worked.  Now the software doesn't seem to allow it.  so....are there other accounts???  only for prior year contributions to roth rolled over.

these questions all are directed at whether this qualifies as backdoor roth.  I am convinced it does.  The taxpayer was convinced.  The broker was convinced.  We have done this every year for 4-5 years.  How do i get the software to give me the answer like it has in prior years?

[Just-Lisa-Now-]

"You make the contribution and it is non-deductible, they give a 1099r which i put in the system."

They dont give you a 1099R for a contribution.

You get the 1099R when you convert to a ROTH, you need to have a non deductible IRA basis in your 8606 to make it all flow.

[kensuzy]

so it would make a difference how the software is filled out depending on if it was mine or a client?  It is a client....i used the editorial we.

conversion sentence.....i know.  Software will not cooperate tho!

I read the article.  I have checked B5.

So my questions are not "if" it is non-taxable.  I know it is non taxable.  My question is why the software wont let me make it non taxable

[kensuzy]

8606 wouldnt let me.  And yes, i realize 1099 r is for dist not contribution.  Thanks for pointing that out though.  It came across as a smidge condescending

type n on 1099 r and it works

[qbteachmt]

If you simply want to keep asking why the Program is doing this, we cannot help with a question that has no real substance to it.

If you want to ask about an entry or field that seems different, unfamiliar, or is the source of something that likely makes the difference, we can help.

The scenario that a Backdoor Roth is the same as a "post-tax contribuiton" and an immediate "complete rollover" means there still are qualification details to confirm, which we are trying to do.

"My question is why the software wont let me make it non taxable"

Because you didn't enter the 1099-R correctly, or didn't complete the 8606 as required, or something else makes this seem taxable to the program and we are trying to help you identify it, and this is something we cannot see, so we need details or we ask for details, to review something you might have overlooked or forgotten.

[qbteachmt]

"8606 wouldnt let me"

Let you, what?

We cannot see any of this.

[qbteachmt]

@kensuzy 

What about this comment you made: "I read the article. I have checked B5."

Read that article again; isn't B5 for Roth Distribution that was rolled? You don't have this.

[kensuzy]

nevermind.

I figured it out on my own

If you could not figure out what "wouldn't let me" meant after your comment about the 8606, then may be helping others is a stretch for you

[qbteachmt]

"I figured it out on my own

If you could not figure out what "wouldn't let me" meant after your comment about the 8606, then may be helping others is a stretch for you"

Sorry you got frustrated with something you were entering.

"And yes, i realize 1099 r is for dist not contribution. Thanks for pointing that out though."

Yes, when we are our own bosses, it sometimes helps to have someone else remind us to examine everything we might be skipping past, when we seem to be looping through our own errors. Did you notice Lisa has a bit of experience?

This is not Customer Support or Tech Support. This is peer users trying to help, while also being a bit busy this time of year.

Wow; you just lost out on the chance to explain that entry, and what you found that resolved it, as being helpful to other peer users that volunteer here.

[qbteachmt]

I wanted to clarify this: "type n on 1099 r and it works"

Is that the code for Recharacterization? This isn't the scenario your taxpayer has. That's a different provision entirely.

[qbteachmt]

https://www.irs.gov/retirement-plans/ira-faqs-recharacterization-of-ira-contributions

"Effective January 1, 2018, pursuant to the Tax Cuts and Jobs Act (Pub. L. No. 115-97), a conversion from a traditional IRA, SEP or SIMPLE to a Roth IRA cannot be recharacterized. The new law also prohibits recharacterizing amounts rolled over to a Roth IRA from other retirement plans, such as 401(k) or 403(b) plans."

Recharacterization is basically a "do over" which is not the same as Backdoor Roth.

[Nooch]

Hi,

I was able to get it to show as non-taxable, but it is calculating the early withdrawl penalty.  Any ideas, how I can resolve this issue?

[rbynaker]

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@Nooch wrote:

Hi,

I was able to get it to show as non-taxable, but it is calculating the early withdrawl penalty.  Any ideas, how I can resolve this issue?

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This thread is a year old.  Please start a new one and provide your set of facts.  There are a whole lot of nuanced concepts that make each situation slightly different and terminology that is often mistakenly used interchangeably such as convert, rollover, recharacterize, etc.