The basic example assumed that both the traditional IRA contribution and the Roth conversion step happened in the same year (for example, both events happened during 2023, for the 2023 tax year). However, it’s possible that both of those steps did not take place during the same tax year. The transaction could be spread across 2 different years.
For example, you could contribute to the traditional IRA during 2023, but then not do the Roth conversion step until March of 2024 while you are doing your taxes. If this is what you did, here is how to report the backdoor Roth in the software for the year of the contribution (2023):
Enter the IRA Contribution
1. Go to Deductions/Credits > Common Deductions/Credits > IRA Contributions. Answer “Yes” to the question, “Did you make any traditional or Roth IRA contributions during the year?” Answer for both you and your spouse, if applicable.
2. Next, enter the amount of your original IRA contributions for the year. Enter the amount in the box for the type of IRA you originally contributed to, even if the money is no longer in that type of account. In our case, our first contributions were to a traditional IRA. Then we converted them to a Roth. So we’ll enter the original contribution in the box for traditional contributions.
3. Answer the remaining questions on that same page. Unless you had something special, these will probably all be “No”. If you recharacterized your IRA contributions before doing the backdoor Roth, you’ll want to see our article for Reporting a Backdoor Roth Plus a Recharacterization (clickable link to that article). Save and Continue.
4. The next page asks if you withdrew any contributions. Answer according to your situation. If all you did was the backdoor Roth strategy (contributed to a traditional IRA and then converted that to a Roth), this would be “No”. Withdrawing is removing the contribution and treating it as though it was never made, which is not the same as converting. Save and Continue.
5. On the IRA Basis and Value page, you’ll enter any basis information you have in your IRA from prior tax years. If this is your first year contributing to a Roth, that will be $0. If you do have IRA basis from prior years (probably from contributions to a traditional IRA that you couldn’t deduct), you’ll get that information from Form 8606 from your prior tax returns, and enter it here. You’ll also need to fill out the other boxes on the screen according to your situation. Save and Continue.
6. The next page is your IRA Deduction Summary. If you’re employing this backdoor Roth strategy, that is probably $0 as well.
That’s it for entering the IRA contribution.
As for the Roth conversion step – in this example, you will not get the 1099-R for this until early 2025, because it occurred in 2024. The 1099-R conversion will need to be reported on your 2024 tax return, essentially completing the other half of the reporting for this backdoor Roth.
Now let’s look at the forms, to make sure this turned out like it should have. On almost any screen in FreeTaxUSA, click on the 3 buttons at the top right, then choose “Preview Return” from the drop-down menu.
If your traditional IRA contribution was nondeductible, you will not see anything related to this backdoor Roth on your main 1040 form. Included with your tax return, you should see Form 8606, with the title Nondeductible IRAs. Line 14 of this Form 8606 shows the basis in your IRA.
Next year when you’re doing your taxes, you’ll report the other half of the transaction. You’ll get a Form 1099-R showing the conversion that you did. You’ll report that Form 1099-R on your 2024 tax return. You’ll also need to enter the $6,500 amount that carries over from Line 14 of the 2023 Form 8606. This will make it so that $6,500 of the conversion amount won’t show as taxable to you.