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