1

Last year say I made $100,000.00 in income through my job (that is the amount on my w2 in box 1). I have a 401k through my job, so I use Roth backdoor IRA, so last year I moved 6000 into a traditional IRA and moved those through a Roth IRA. It was early in the year, so I moved additional 6000 the same way for the previous year. So total of 12000 moved to Roth IRA via backdoor.

Now this year I filed taxes via Turbo Tax. I realized that in the tax return form, the box 4a. IRA distributions is set to 12000, and so also the box 4b. Taxable amount is set to 12000. So my itemized deductions seems to have been deducted from 112000 - this seems to be wrong! This 12000 I used for backdoor IRA is from the the 100,000.00 I made in salary. So did I get taxed on this doubly? Also this brings up my taxable income bumping me to a higher tax bracket! I would not think that the 12000 will be deducted from my income, however its not additional income either. So my taxable income should stay at 100,000.00.

Am I looking at this wrong? If not, then how can I fix this as I have already filed my taxes and already received the refund?

Side question - If the above is indeed an issue, how did Turbo Tax make this error? Did I miss inputting some information somewhere?

1
  • 2
    Why did you use the backdoor approach? At that income level, you can contribute directly to a Roth IRA and don't need the back door
    – yoozer8
    Apr 16, 2023 at 0:19

1 Answer 1

3

Breaking this down into tax years, you made a $6,000 traditional IRA contribution (non-deductible) for 2021 (in early 2022) and a $6,000 traditional IRA contribution (non-deductible) for 2022.

To record these as non-deductible, you would file Form 8606 Part I for 2021 ($6,000), and Form 8606 Part I for 2022 ($6,000), even though both contributions occurred in 2022.

Then for the conversion, you had a $12,000 conversion in 2022, which applies entirely to the 2022 tax year. This is recorded on Form 8606 Part II.

If you don't have Form 8606 filed for 2021 or if it's showing an incorrect basis, you can file it standalone if it doesn't change your tax liability. You may have a $50 penalty for a late Form 8606 filing. You'll likely need to file an amended 2022 return once 2021's Form 8606 is corrected.

If you do have Form 8606s for 2021 and 2022, your numbers are off somewhere. Remember that the 1099-R your traditional IRA custodian sends you won't tell you what your basis is. Because of that, it's common for people to list the whole distribution amount as taxable accidentally.

Line 4a being $12,000 is correct, but Line 4b should be close to $0 if you didn't have significant gains on those non-deductible contributions or pre-tax IRA balances on 12/31/2022.

This is all assuming you had $0 in pre-tax IRA balances on December 31, 2022 - no traditional, rollover, SEP, or SIMPLE IRAs. End-of-year pre-tax IRA balances trigger the pro-rata rule for conversions, which is a different situation altogether.

7
  • Yes, line 4b is 12000. I moved the money immediately from Tradtional to ROTH, so 0 gains on that money. So you are suggesting that I need to amend my 2021 Tax return first, and then amend the 2022 tax return? I'm confused on where I should report the 6000 that I moved in Jan.2022 for the previous year.
    – Ufder
    Apr 15, 2023 at 23:24
  • @Ufder not necessarily amend 2021, but your return should have Form 8606 reporting the $6,000 contribution for 2021. If it doesn't, you can file Form 8606 as a standalone submission. Important to note that the contributions are reported as $6,000 for 2021 and $6,000 for 2022 even though both were made in Jan 2022, but the conversion is reported as $12,000 for 2022.
    – Stan H
    Apr 15, 2023 at 23:31
  • Thanks! I made the contribution after filing taxes for 2021, hence it was not reported in the 2021 tax returns. I usually use Turbo Tax, so I don't know if they allow filing 8606 separately, so you know?
    – Ufder
    Apr 15, 2023 at 23:38
  • @Ufder You can grab it from the IRS, complete it, and mail it in. I don't believe you can e-file it standalone.
    – Stan H
    Apr 15, 2023 at 23:45
  • 1
    Thanks for the help, I was able to amend the 2021 8606 via Turbo tax, and then did the same for 2022 that reduced the repeated 12k from my income! What a relief.
    – Ufder
    Apr 16, 2023 at 23:23

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .