How to Report Backdoor Roth IRA

[kmsmith1]

Looking for guidance on how to report a backdoor Roth IRA.

[qbteachmt]

Basically a type of conversion, from Basis (nondeductible Traditional IRA) to Roth (which is always nondeductible).

And your client has to have No Other Basis or value in any Traditional IRA or tax deferred account, for this to work. Otherwise, you have a regular conversion with a taxable percentage.

Example:

They already have $5k in SEP-IRA. They put $5k into a Traditional IRA post-tax, and roll it to Roth as "backdoor" but what they did is take a 50% taxable distribution for conversion, indirectly.

[kmsmith1]

I have a client that in 2019 made Roth IRA contributions of $6k.  However, the client was over the income threshold.  On 6/3/2020, before filing 2019 taxes, the client recharacterized the Roth contribution to Traditional IRA to correct the Roth contribution.  On 6/5/2020, the traditional IRA was converted to Roth IRA as a backdoor Roth IRA.  Both transactions were completed before the tax filing date of 7/15/2020.

For 2020, the taxpayer contributed $6k to the Roth IRA and was not above the income threshold.  How should this be reported in ProSeries Basic for tax year 2020?

[qbteachmt]

Okay, before the filing, it was not Removed. It was put to Traditional, for 2019 or for 2020?

[kmsmith1]

It was to Traditional IRA for 2020 then Converted to Backdoor Roth IRA for 2020.

[qbteachmt]

"It was to Traditional IRA for 2020"

So, now you have both a Nondeductible Trad IRA contribution for 2020 as well as the $6k you told us got put into the Roth for 2020?

Or, you need to go back to confirm the amount moved from Roth to Traditional, while working on the 2019 tax form, even though it was moved in 2020, was still considered a 2019 contribution.

Because now, for 2020, you seem to have excess contribution.