Nowadays, people use software like TurboTax to keep track of their contributions and tax breaks. TurboTax is the US based tax preparation software that helps the users to prepare and analyze the tax structure systematically and file state as well as federal tax returns. However, sometimes, users face difficulty in properly entering the backdoor Roth IRA conversion. Here, in this article, we will discuss how to report Backdoor Roth in TurboTax.
Steps to Report Backdoor Roth in Your TurboTax
Before proceeding with the steps, first, you need to enter the Non-Deductible Contribution made to your Traditional IRA. Although this tutorial is written for TurboTax Online, the procedure is also similar for the desktop version and should not cause you any problem.
- First of all, open your tax return.
- Next, in the TurboTax Online, click on Search, and enter IRA contributions.
- Then, click on Jump to and on the Traditional IRA and Roth IRA window, click on Traditional IRA.
- After that, under Did you Contribute To a Traditional IRA?, select Yes.
- Next, Under Is This a Repayment of a Retirement Distribution?, choose No.
- Now, fill in the amount you have contributed this year in the Tell Us How Much You Contributed window.
- Next, select No under Did You Change Your Mind? option.
- Now, you need to answer the other provided questions as they apply to your current tax situation.
Then, you need to tell TurboTax about the backdoor Roth conversion that you have made.
- Search for 1099-R, and then click on Jump to.
- Next in Your 1099-R window, just click on Yes and then continue. Now, if you end up on the Your 1099-R Entries screen instead, then click on Add Another 1099-R option.
- After that, you can either choose to manually input the details of your 1099-R form by following the on-screen instructions, or you can import it directly if you have a digital version.
- Select No option under Did You Inherit the IRA from [IRA Custodian]?
- Next, under What Did You Do With The Money From [IRA Custodian]?, you need to choose I moved the money to another retirement account (or returned it to the same retirement account).
- Thereafter, select I converted all of this money to a Roth IRA account.
- Next, finish answering the remaining questions accurately until you get to the Your 1099-R Entries window, which means that you have finished reporting your backdoor Roth conversion.
After you have followed these steps, you should have successfully entered the information which the software needs to calculate your tax return properly.
How to Check Your Tax Results?
In order to check how you will be taxed on your Roth IRA, you can follow the steps given below: –
- First, click on Tax Tools present on the left-hand side of the screen.
- Next, click on Tools.
- Then, on the Tool Center screen, choose View Tax Summary.
- Now, click on Preview my 1040 on the left-hand side of the window.
- At last, in the section titled 1040 Postcard, Line 4, you should see your Roth IRA listed under IRA distributions.
Now, as long as you did not have any earnings between when you contributed to your Traditional IRA and when you did your backdoor conversion to a Roth IRA, your Taxable amount should be shown zero. However, if you did have earnings between the contribution and the conversion, then they will still be taxable and will show up here. There should not be anything under the section titled Schedule 1, Line 32 IRA deduction.
If you are earning enough to be able to make a standard contribution to a Roth IRA, but you still want to take advantage of the flexibility and boost in post-retirement funding that one will provide, then a backdoor Roth is the way to go. TurboTax help will guide you to properly enter it into TurboTax, so you can easily keep track of your contributions, deductions, and how much tax you should expect to pay at the end of the financial year.