How do I change taxability of a "backdoor" IRA to Roth conversion zero on the 1099R input?

[conwaytaxes]

The 1099R is coded 2 with taxability not determined.  How can I make taxability zero?

[Just-Lisa-Now-]

to have a backdoor ROTH you need to have some non-deductible IRA contributions on the 8606, that makes the distribution on the 1099R non-taxable, one wipes out the other.

A conversion is a taxable event, you convert a traditional IRA to Roth and pay the taxes now, so when you eventually take the money out of the ROTH, you pay no tax on the basis or the earnings.

So what do you have?   Does the client have a non-deductible IRA basis on the 8606?

[qbteachmt]

A Backdoor Roth is the same as a conversion. What makes it "backdoor" is that it relies on the amount in the Trad IRA being only non-deductible (all basis) and that there are no earnings (untaxed amount) and by doing it quickly, it is called Backdoor.

Also keep in mind the issuer of that 1099-R doesn't necessarily know what happened to the funds, so they code the 1099-R for the money Out. Not for what happened afterwards.

The first thing to do is confirm you have a nontaxable event. Did they have only this amount that went into the Trad IRA and was immediately converted to Roth? Or, did they also have funds in a different Trad IRA account, SEP IRA, SIMPLE IRA? Did the conversion happen immediately, or was their a delay that resulted in earnings (taxable gain) and/or a possible loss (in this most recent market)?

Because if there are other funds that are pre-tax or untaxed, you have a taxable pro rata conversion. Not a Backdoor.