Backdoor Roth

[SteveD9]

I am trying to show a backdoor roth conversion from a 1099-R traditional IRA distribution Code 2 and no matter what I do I'm getting an error. Can anyone give me a blow by blow of what I'm missing here? Happy to provide whatever details are needed. 

[GodFather]

Can you provide any information on what the error is. Have you done a "review" of the return to determine what the error is?  A Code 2 indicates an exception to the 10% penalty, but the distribution is normally taxable.  

[Just-Lisa-Now-]

Step one :  Enter the IRA contribution, (hopefully its non-deductible or this doesnt work)

That non-deductible IRA basis sits on the 8606.

Now the client has the bank convert that IRA to a ROTH,

Get the 1099R for the conversion and the non-deductible IRA basis on the 8606 should make the conversion non-taxable.

[Skylane]

Jim has a  good workflow 

https://accountants.intuit.com/community/proseries-tax-discussions/discussion/backdoor-roth-on-prose...

[SteveD9]

This is what I did but it's populating Line 13 of the 8606 with an *. I believe it should be populating lines 8, 9, 10, 11 and 13 based on prior experience and other research. 

[SteveD9]

I tried Jim's way too and no matter what I get an amount on Line 13 with an *.

[kobe22]

I believe it's not working for you because the form needs to be corrected to show code 7 or 1. If it has a code 1 make sure box 2a shows 0 as taxable amount.

[SteveD9]

The 1099-R shows the full amount in Box 2A with the "taxable amount not determined" box checked. It's code 2. I believe that is correct. It was an early withdrawal of a traditional IRA. I tried what you said to do just in case and it does not populate the correct fields and puts the amount of the contribution on Line 14 of Form 8606 which is incorrect. 

[kobe22]

I'm trying to figure this out for a client, too.  It will allow the conversion if the box IRA/SEP/Simple is checked and it populates on Form 8606.  Otherwise, I don't know how to do it either. I also, check box B5 to indicate that it's a conversion.

[Skylane]

See what happens if you put code 2 in first block (exception applies) and 7 in the second

all the back door ROTHs I’ve done are normal distribution 

[SteveD9]

This did not change anything. I'm still left with being forced to override lines 8, 9, 10 ,11 which should be completed in this scenario. Nothing I have tried will do this correctly.

[IntuitKatie]

@SteveD9  We understand how disruptive it can be when something does not work as expected. Since this community is designed for peer-to-peer resource sharing, our technical team doesn't monitor these threads for troubleshooting. We do need you to reach out to our support team directly, even if you’ve already shared the details here. Our support specialists need a formal ticket, a clear summary of the topic and a client case file to investigate the behavior you're seeing. They have the tools to determine if it’s a quick fix, a change in instructions, a new unexpected behavior or one we’re already reviewing.

Reporting it through the proper channel ensures your specific case gets documented and addressed by the people who can fix it.

Help us help you by heading over to ProSeries Support so we can take a closer look!

[SteveD9]

Katie, thank you for the response. I did reach out to Intuit support on the phone and spent nearly twenty minutes with a patient gentleman who could not get this straightened out nor did he seem to really understand what it was I was trying to achieve. I even requested this be escalated to a higher team but it didn't seem it was possible. So I thought I'd reach out to the community. 

[IntuitKatie]

@SteveD9 that asterisk is a star.  ProSeries says that that is just an indicator that the amount also appears on the 'Taxable IRA Distribution Worksheet' and needs to be adjusted there - which, if it is appearing on line 13, you already have.  So the asterisk is nothing to worry about (you can read the dialogue on it if you click the asterisk and then look at the 'about' box at the top left).  The $7000 contribution should appear on lines 3, 5 and 13 of the 8606 and then you're good to go.

[qbteachmt]

A Backdoor is a post-tax contribution to a Trad IRA for a person who has no funds in any Trad IRA, SEP IRA, SIMPLE IRA, or rollover IRA. Because it is Post Tax, it is Basis. They should not invest it until it transfers to the Roth IRA. And the tax form issued for the money out, 1099-R, might not have the right code for the conditions for this taxpayer. Their Basis needs to be entered so that it reflects a nontaxable conversion.

A Backdoor is just a conversion. The magic is the Basis factor.

[SteveD9]

Thank you for the continues replies. If the contribution to the traditional IRA was withdrawn immediately and deposited into a Roth, there would be no basis in the traditional IRA. So therein lies my problem. There should be nothing on Line 14 for basis. I've reviewed a number of legit examples of how this is supposed to appear on Form 8606 and every one of them points to the same result. 

I am not trying to be difficult, just trying to get it right. 

[Just-Lisa-Now-]

YOU need to enter the IRA contribution and make sure it shows as non-deductible, otherwise its not a backdoor.

[qbteachmt]

"If the contribution to the traditional IRA was withdrawn immediately and deposited into a Roth"

Then it's not a Backdoor conversion. You are changing the statement of facts.