What tax form do I use for backdoor IRA?

Asked by: Briana Funk II  |  Last update: February 9, 2022
Score: 4.3/5 (36 votes)

It's your responsibility to report the non-deductible contribution to your Traditional IRA at tax time on IRS form 8606, Nondeductible IRAs. Form 8606 helps track your basis and avoid paying additional tax on your non-deductible contribution as you convert the balance to a Roth IRA.

How do I report backdoor IRA on taxes?

Enter 1099-R

Go to Federal Taxes -> Wages & Income -> IRA, 401(k), Pension Plan Withdrawals (1099-R). As you work through the interview, you will eventually come to the point to enter the 1099-R. Select Yes, you have this type of income. Import the 1099-R if you'd like.

How do I report backdoor IRA on 1040?

Form 8606 Line 18 should be reported on Line 4b of Form 1040 for a 2018 Backdoor Roth IRA.

How do I report backdoor Roth conversion?

If the recharacterization occurred in 2019, include the amount transferred from the Roth IRA on Form 1040 or 1040-SR, line 4a; or Form 1040-NR, line 16a. If the recharacterization occurred in 2020, report the amount transferred only in the attached statement, and not on your 2019 or 2020 tax return.

Do you get a 1099-R for a backdoor Roth?

Put simply, a backdoor Roth is a nondeductible traditional IRA contribution followed by a Roth conversion. The Roth conversion part of this backdoor Roth strategy will be reported to you on a 1099-R because the conversion involves assets leaving a traditional IRA.

The Greatest Tax Hack Ever? (backdoor Roth IRA explained)

21 related questions found

How do I pay taxes on backdoor Roth?

A backdoor Roth IRA is probably a bad idea if ...
  1. The only way you can pay the taxes due is with money from your IRA withdrawal. ...
  2. You'll need the money in five years or less. ...
  3. The withdrawal from your IRA will push you into a higher income tax bracket.

How do I enter a backdoor Roth in TurboTax?

TurboTax Online
  1. Open your return if it's not already open.
  2. Inside TurboTax, search for ira contributions and select the Jump to link in the search results.
  3. Select Traditional IRA on the Traditional IRA and Roth IRA screen and Continue.
  4. Answer No to Is This a Repayment of a Retirement Distribution?

What happens if you don't file Form 8606?

An individual who fails to file Form 8606 to report a non-deductible contribution will owe the IRS a $50 penalty. Additionally, if the non-deductible contribution amount is overstated on the form, a penalty of $100 will apply.

Is a backdoor Roth taxable?

If you don't have any money sitting in traditional IRA accounts, a backdoor Roth is a smart way to build up retirement savings that will be tax-free in retirement.

What is an IRS form 5498?

The information on Form 5498 is submitted to the IRS by the trustee or issuer of your individual retirement arrangement (IRA) to report contributions, including any catch-up contributions, required minimum distributions (RMDs), and the fair market value (FMV) of the account.

Does TurboTax have form 8606?

To trigger the 8606 in TurboTax

Inside TurboTax, search for this exact phrase, including the comma: 8606, nondeductible ira contributions. Select the Jump to link in the search results. Proceed through the IRA section, answering questions as you go.

Does TurboTax support backdoor Roth?

Reporting the Backdoor Roth IRA properly on Turbotax is unfortunately even more complicated than filling out Form 8606 by hand. The key to doing it right is to recognize that you report the conversion step in the Income section but your report the contribution step in the Deductions and Credits section.

How do I report an IRA contribution to TurboTax?

To enter your traditional IRA contribution:
  1. On the left side of your screen, click Federal.
  2. At the top of your screen choose Deductions and Credits.
  3. Scroll down to Retirement and Investments.
  4. Click Start on Traditional and Roth IRA Contributions.

When should I file form 8606?

File an IRS Form 8606 for every year you contribute after-tax amounts (non-deductible IRA contribution) to your traditional IRA, and every year you receive a distribution from your IRA as long as you have after-tax amounts, including after-tax rollover amounts from traditional, SEP, or SIMPLE IRA plans.

What is a form 5329?

Form 5329 is the tax form used to calculate possibly IRS penalties from the situations listed above and possibly request a penalty waiver. Form 5329 applies to each individual that might owe a penalty, so for married couples filing jointly, each spouse must complete their own form.

What tax form do I use for Roth conversion?

Form 5498 reports IRA contributions, rollovers, Roth IRA conversions, and required minimum distributions (RMDs) to the IRS. Your IRA trustee or custodian is the one responsible for mailing Form 5498 to the IRS, along with a copy to you.

How do I report backdoor Roth on Taxact?

Under Federal Q&A, look for IRA Contributions in the right column and then click on Yourself Nondeductible traditional IRA contributions. Enter your contribution amount for last year. Enter your prior years basis from line 14 of Form 8606 in your previous year's tax return or check the box for no basis.

How do I report a Roth conversion on TurboTax?

To report the Traditional IRA distribution and the conversion contribution:
  1. log in to your Turbo Tax account.
  2. click on "take me to my return"
  3. click on the "federal taxes" tab.
  4. click on "wages and income"
  5. choose "show more and "see list of all income"
  6. scroll down to "retirement plans and social security"

Do you have to fill out form 8606 for a backdoor Roth?

When you complete a Backdoor Roth conversion you MUST report it on form 8606. If you have ever tried a Backdoor Roth conversion yourself and don't know what form 8606 is, that is a problem.

How does the IRS keep track of Roth IRA contributions?

Roth IRA contributions do not go anywhere on the tax return so they often are not tracked, except on the monthly Roth IRA account statements or on the annual tax reporting Form 5498, IRA Contribution Information. ... Roth conversions are reported on Form 8606, so it is more likely that these are tracked.

Is backdoor Roth still allowed in 2022?

What Now? Of course, Build Back Better didn't pass in 2021. That means that it's perfectly legal to go ahead with backdoor Roth contributions for 2022, too.

Is backdoor Roth still allowed in 2021?

In 2021, single taxpayers can't save in one if their income exceeds $140,000. ... High-income individuals can skirt the income limits via a “backdoor” contribution. Investors who save in a traditional, pre-tax IRA can convert that money to Roth; they pay tax on the conversion, but shield earnings from future tax.