Form 8606 Line 1 empty
I made $7000 non-deductible contributions to my traditional IRA account for year 2024 and $6500 for year 2023. The 2023 contribution was done in 2023 to Roth IRA but I recharacterized it in 2024. The immediately I converted all of it (both 2024 and recharacterized 2023 contribution) to Roth IRA. Because the conversion were made in 2024, I got a 1099-R form from my bank with the gross income of 14900 ($1400 is the gain). Below are the questions on the retirement information screen and my answers (in bold).
Prior Year IRA Contributions
- Have you ever had a nondeductible traditional IRA contribution on any prior year tax return? Yes
Traditional IRA / SEP / SIMPLE Basis and Value
- Based on the Form 8606 that you filed in 2023, your total basis for 2023 and earlier years is $6,500.
- Enter your total basis, if any, in traditional IRAs (including SEP and SIMPLE) for 2023 and earlier years: $6500
- Enter the value of all your traditional, traditional SEP, and traditional SIMPLE IRAs as of December 31, 2024, Don't include any amount rolled over or converted to a Roth IRA. Subtract any disaster distribution repayments and any treated as rollovers that you made in 2024. $0
- Enter the amount, if any, of your contributions to a traditional IRA for 2024 that were actually made from January 1, 2025 through April 15, 2025: $0
In all the above questions, there is no line where I can enter the non-deductible contributions I made for 2024, i.e. $7000. Hence, form 8606 line 1 is coming out to be empty. Line 2 is $6500 and Line 3 is $6500.
Comments
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If your AGI for 2024 did not exceed the income limits and other criteria for a deductible contribution, FreeTaxUSA will assume that the contribution was deducted.
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Got it. Since I already made the non-deductible contribution for 2024, how do I enter it as my basis ?
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You may have intended to not take the deduction, but the software determines whether or not it applies. If you qualify for the deduction, the software automatically takes it.
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So if I understand what you are saying, on form 8606, my taxable amount will be $(14900-6500) = $8400 since my basis for 2024 was not counted as non-deductible by the software. However, the software should deduct the $7000 automatically from my total taxable income. Where (which form) should I then see the $7000 amount as deduction? Do you see any issues filing as such?
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The $7,000 IRA deduction should appear on Schedule 1, Line 20 which carries over to the 1040, Line 10 (adjustments to income).
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Thank you. I appreciate it. Two follow up questions-
1. I didn't enter any IRA deduction in the software, where would it find the $7000 amount ?
2. Since the a MFS filer, I am not eligible to make direct Roth contribution. Hence, I made the non-deductible contribution to trad IRA to do backdoor Roth conversion. So what does the IRA deduction imply to the IRS? And why would the software choose automatically?
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Hi Scouse_s,
We have a number of excellent articles about Backdoor Roth conversions. Instead of trying to explain everything see the link and the articles. They have screen shots and instructions.
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