Backdoor Roth IRA Entry in ProConnect - MFJ

[tccpg289]

Taxpayer is married filing jointly, and the spouse contributed $6k to a non-deductible IRA and immediately converted to a roth.

Their combined income is $700k for 2022.

Right now, the $6k is coming through as taxable on the 1040 (based on the information entered from the 1099-R).

How does this get entered correctly?

[itonewbie]

You need to enter the taxpayer's and spouse's contributions under separate columns.

Read this article for detailed instructions:

https://proconnect.intuit.com/support/en-us/help-article/retirement-tax-credits-deductions/entering-...

[itonewbie]

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@tccpg289 wrote:

Taxpayer is married filing jointly, and the spouse contributed $6k to a non-deductible IRA and immediately converted to a roth.

Their combined income is $700k for 2022.

Right now, the $6k is coming through as taxable on the 1040 (based on the information entered from the 1099-R).

How does this get entered correctly?

---

If the spouse contributed $6K and that was distributed for ROTH conversion along with earnings/loss, 1099-R wouldn't have reported that $6K is taxable because that's the basis.  Take a second look at the 1099-R and make the relevant entries in accordance with the article cited above.

[qbteachmt]

"and the spouse contributed $6k to a non-deductible IRA and immediately converted to a roth."

Was there only nondeducted post-tax amounts ever into that type of account (Trad, SEP, SIMPLE IRA)? Was there no other nonbasis pre-tax contribution, no earnings, in any of those account types for this spouse?

[tccpg289]

Ultimately it should not be taxable, I am just trying to figure out how to enter it in the software so that it doesn't come through as taxable.

[qbteachmt]

"Ultimately it should not be taxable"

That's because the entire amount converted also is basis. That's why it works, so that's what the data entries need to reflect. If none of what I asked is true, then there will be pro-rata tax computed.

The 1099-R issuer may not provided everything that has to be entered. For instance, they don't know if there are other accounts of that type with deducted contributions or never-taxed earnings. Only the taxpayer and you will be able to enter what applies in that worksheet.

[itonewbie]

@tccpg289 You already have the input instructions and tax technical from the posts above.

[itonewbie]

@tccpg289 It is not true that such conversions should ultimately be nontaxable.

In order for the conversion to be totally nontaxable, all of the spouse's IRA accounts, if there's more than one, must consist only of nondeductible contributions and no earnings.  Otherwise, prorata rule will apply.

If all of the following are true, that's when you have a clear case that the conversion is nontaxable:

• spouse had only one IRA account;
• that account had no previous contributions;
• only nondeductible contribution was made; and
• conversion was made before any earnings was accrued.

We don't know whether that's the case for your client.  Hopefully, you do.

[George4Tacks]

If this is not enough, contact Support EITHER https://proconnect.intuit.com/community/proconnect-tax-news-updates/discussion/proconnect-tax-assist... OR https://proconnect.intuit.com/support/en-us/help-article/intuit-account-settings/contact-proconnect-...

[taxmo · Accepted solution]

Here is how to do a backdoor Roth IRA contribution in ProConnect.

- Enter the (presumably non-deductible) Traditional IRA contribution: (They'll get a 5498 for it eventually, but may not be until as late as May 31st).  Deductions -> Adjustments to Income -> Retirement -> IRA contributions -> enter the amount.

- Then enter the 1099-R for the withdrawal from the Traditional IRA, which may have distribution code 2 (early distribution with exception).  It will also likely have a taxable amount, but with the "taxable amount not determined" box checked. It should also have the "total distribution" box checked (see below).  Enter all that as is into ProConnect.  Then go to the Form 8606 tab -> Conversions to Roth / Traditional distributions, and enter the amount of the conversion.

Pro-rata rule: If the person's traditional IRAs have both deductible (pre-tax) or non-deductible (after-tax) contributions (contributions while their income was too high), any rollover is a proportional amount of both. Pro-rata rule treats all IRAs as one IRA. If they want to keep some traditional IRA funds as pre-tax, may want to roll the entire pre-tax IRA to a 401k first, then use the IRA for after-tax contributions that will be converted to Roth.