Backdoor Roth on ProSeries

[Skylane]

TP made a 6K Backdoor Roth conversion (a non-deductible IRA contribution that is converted to a Roth IRA. I'm not sure I understand the entries required on ProSeries or if I'm doing it correctly.

TP Opened an IRA (no other IRAs) w/ 6K and converted to Roth IRA same day (closing the IRA). 

1099R Dist Code 2 for 6K is marked Taxable amount not determined and total distribution. I entered 1099R and then at the bottom of the worksheet selected B5 (Full amount of distribution was converted to a Roth IRA. 

The 6K is entered on 8606 Line 16 & is taxable.

The transaction increases tax by about 2K. Just want to know that I'm handling this correctly. 

IMO, I'm not sure it's worth spending 2K in taxes to get 6K into a Roth

[rbynaker]

Shooting from the hip but you need to enter the original $6K Traditional IRA contribution (which the software will determine is non-deductible, creating basis).  Then you probably need to enter a $0 somewhere for FMV of IRAs at year-end to get all of the basis allocated to the Roth conversion.

[TaxGuyBill]

A Rick said, ProSeries needs to know the Basis of the Traditional IRA.  I think Rick's method of entering the Traditional IRA contribution works (and is probably the correct way to do it), but I also think there is a "Quickzoom" button on the 1099-R worksheet that you can enter Basis as well.

If there were not any remaining Traditional IRA balances at the end of the year, there should be $0 of tax due to the current year backdoor Roth.

[Jim-from-Ohio · Accepted solution]

here is how I do it and it works great for me

1. Enter the traditional IRA contribution on the IRA worksheet

2. If then flows naturally to form 8606

3. Enter 1099-R Worksheet, make sure IRA box is checked

4. Scroll down to B-5, check that box that rolled over to Roth

The End

[Skylane]

@Jim-from-Ohio   I think you got it! 

I was reticent to make an entry on IRA worksheet line 1 because it's supposed to be a non-deductible IRA contribution. But, (Intuit be praised) it does create an 8606.... and tax is generated on 1/2 the contribution,.as it should be.  I guess there will be am 8606 in her future forever..

Thanks

[rbynaker]

Why should there be tax on 1/2 of the contribution?

[qbteachmt]

Did you enter that the initial $6k to the Traditional is nondeductible? That way, it is all considered basis. FMV at the end of the year is $0, because the entire distribution was converted, and it all was already taxed, and there are no earnings. And don't forget that Traditional, SEP and SIMPE IRAs are aggregated for purposes of determining pro rata taxable against basis.

Your taxpayer should have no tax; not even on half.

[Skylane]

You're correct. My mistake that I entered a 6K  as YE IRA balance when should be 0  Entering the way Jim said gives no additional tax. 

[sspfin]

I followed your steps exactly and my tax liability increased by 1,320. 

Do you know what I can do to make it so there's no change in the tax liability? Thanks! 

[qbteachmt]

"I followed your steps exactly"

If you are not using ProSeries for your client...You seem to be lost on the internet.

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Thanks.