Backdoor Roth Conversion filing issue

conrad

Hi,

In 2024 I made non-deductible Traditional IRA contributions and then converted that Traditional IRA balance to a Roth IRA. So I got a 1099-R for the distribution. I believe I correctly input the 1099-R and follow-up questions into FreeTaxUSA (yes this is a Roth conversion, my 2023 and 2024 year-end Traditional IRA balances are zero, yes I've made non-deductible contributions).

This should be reflected in the (draft) Form 1040 line 4a ("IRA distributions") as the full distribution amount ($7006) and line 4b ("Taxable amount") as, you know, $6 (a tiny amount of interest before the conversion). In past tax years (2023), it was. But this year (2024) FreeTaxUSA is incorrectly filling line 4b with the full distribution, which increases calculated tax owed substantially.

Form 8606 Part I lines 1 (nondeductible contributions), 3 (math), 5 (math), 13 (math), and Part II line 17 (IRA conversion basis) are also incorrect (empty); and line 18 (taxable amount) has the incorrect $7006 value.

Is this a known issue? Is it something I can fix on my end?

Thanks!

Henry

Hi Conrad,

Reporting a Backdoor Roth can be tricky, but there's a great article on our Community that walks you through the steps of entering a Backdoor Roth in our software, if you'd like to check it out.

It sounds like you have already entered the 1099-R information and indicated that you converted the distribution from a traditional IRA to a Roth IRA. Next, you need to account for your nondeductible IRA contributions.

You can do that when you get to the Deductions/Credits portion of the software. Go to Deductions/Credits > Common Deductions/Credits > IRA Contributions.

On the IRA Contributions screen, enter the traditional IRA contribution that you made in the current year. If your income is within the limits for taking a deduction for your IRA contributions, then you will come to the "Do you want to take your IRA deduction?" screen. You would need to indicate there that you do not want to take your IRA deduction and enter the nondeductible amount of your contributions.   

Once you account for your nondeductible contributions correctly, the program will reduce any tax being calculated for the conversion.

conrad

Ah, I did not realize that the IRA contribution basis flow was totally disconnected from the Income side, over in Deductions/Credits. Form 1040 Line 4b and the 8606 worksheet look correct now. Thanks! It is a little confusing compared to just doing all the IRA stuff in one place.