"Backdoor" is when the Trad IRA contribution is nondeductible, creating Basis, and then immediately converted to Roth, avoiding any earnings or income.

"Conversion" of an amount already in a Trad IRA is a taxable event, unless there is Basis. If there is Basis, then the conversion is pro rata taxable.

Both of these require you to also take into consideration (aggregate) Trad, SIMPLE and SEP IRA amounts. For instance, a person making a backdoor for 2023 needed to not have any other existing account(s) with amounts, put in their contribution, and convert that exact total. Otherwise, it's not a backdoor. It's just a conversion, so now you have some math to confirm.

A 1099-R is issued for money Out.

A 5498 is issued for money In.

You want all of them.

Here's the Help article:

https://accountants.intuit.com/support/en-us/help-article/retirement-benefits/common-questions-form-...

Got it, so any amount contributed in / deducted is always going to be taxable on the conversion, meaning the safest bet is the 1099-R is always taxable (assuming they had always previously deducted)

You're trying to prevent a double dip and/or avoid double taxation.

If it was already taxed, then it comes out not taxable. Examples are Basis (nondeductable Trad IRA), or nondeductable Roth contributions (+ Roth earnings, by regulation, are not taxable). Moving any combination, such as Trad Basis + Earnings (which were never taxed), is pro rata taxable.

If it went in pre-taxed, it comes out taxable. Pre-tax through payroll deduction, or pre-tax meaning deductible/deducted on a tax return, or even rolled over from 401(k) to Trad IRA, etc.

If there is no Basis, then everything Out is taxable, even if not into the taxpayer's hands, unless it simply moves to a similar account type.

401(k) to Trad IRA = not taxable (not a conversion, but a transfer)

401(k) to Roth IRA = taxable (conversion)

Roth 401(k) to Roth IRA = not taxable (transferred from employer plan to personal retirement account of the same type)

And remember the new rules include that the employer can now put the match into the Roth 401(k), and that would have already be taxed through payroll. That's a new provision.

I have a client where all those conditions are met.  He made a non-deductible contribution to a traditional IRA, immediately converted it to a Roth IRA, and the balance of all traditional IRAs at the end of the year was $0. He received a 1099-R with a code 2 (which I entered), but will not receive his 5498 until May. 

I can't figure out how to enter it in Pro-Connect so that Box 8 of form 8606 shows $7,000.  Any tips?

Thanks!

Here's a support topic for you:

https://accountants.intuit.com/support/en-us/help-article/form-8606/common-questions-form-8606-proco...

You have to input the contribution, which will calculate as non-deductible and appear on the 8606.

Then you enter the 1099-R which should show as not income since you have basis from the non-deductible contribution.

It gets messy when you also have no basis IRAs too which appear in the 8606 elsewhere. BUT you have to have the no basis IRAs because some of the conversion money might be taxable, coming from those previously deducted IRAs.