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Whether you’re an experienced do-it-yourselfer or doing your own taxes for the first time, this is your place to learn and share. Here you’ll find information and resources for using H&R Block’s online and software DIY solutions. You’ll also find links to more information to assist you on your DIY journey.

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Pioneer
Posts: 1
Registered: ‎04-30-2018

Backdoor Roth Conversion Error

[ Edited ]

Hi,

 

Need help to determine next steps, here's a summary:

 

Product Used: H&R Block Delux

 

  1. May 2016 - Contributed $5500 into Roth IRA
  2. Jan 2017 - Re-characterized entire balance as Traditional IRA
  3. Apr 2017 - Filed 2016 Taxes, reported Roth IRA contribution, and reported re-characterization (Form 8606, Basis $5500)
    1. Entered in Adjustments section
  4. Jan 2017 - Contributed $5500 into Traditional IRA for 2017
  5. Jan 2017 - Converted entire balance to Roth IRA
  6. Jan 2018 - Received two 1099R; one for Roth IRA and another for Traditional IRA
  7. Apr 2018 - Filed 2017 taxes, included both 1099R, one for re-characterization, one for conversion
    1. Entered in Income and Adjustments section

 

Is this correct? 

 

Thanks,

Ashwin

 

 

Council Member
Posts: 548
Registered: ‎04-06-2016

Re: Backdoor Roth Conversion Error

I'm going to reply in blue text below...

Karen 


 wrote:

Hi,

 

Need help to determine next steps, here's a summary:

 

Product Used: H&R Block Delux

 

  1. May 2016 - Contributed $5500 into Roth IRA
  2. Jan 2017 - Re-characterized entire balance as Traditional IRA  Do you mean the entire May 2016 contribution?  I'm assuming you only recharacterized the $5500 May 2016 contribution. Or did you have other contributions you were recharacterizing as well? 
  3. Apr 2017 - Filed 2016 Taxes, reported Roth IRA contribution, and reported re-characterization (Form 8606, Basis $5500)
    1. Entered in Adjustments section Was the Traditional IRA (that resulted from the Roth IRA recharacterization) a deductible or non-deductible contribution?  If you reported a basis of $5500 on Form 8606 you're saying that it was non-deductible. If you entered the $5500 as an IRA deduction adjustment on Line 32 of your 2016 1040 you're saying that it was deductible.  You shouldn't have done both, but it's possible to break up the $5500 so that part ended up on Form 8606 and the balance ended up in the adjustments section. (ACTUALLY, I just realized you may be saying you entered the contribution and the recharacterization of the contribution in the Adjustments and Deductions section of the software and it ended up with a non-deductible contribution of $5500 reported on Form 8606. I'll continue from here assuming this is the case.)
  4. Jan 2017 - Contributed $5500 into Traditional IRA for 2017
  5. Jan 2017 - Converted entire balance to Roth IRA Entire balance being $11000? The $5500 you recharacterized in #2 above+ the $5500 you contributed in #4? Did you have any other money in a Traditional IRA of any kind?  SEP-IRA, SIMPLE-IRA, Rollover-IRA, other Traditional-IRA account?
  6. Jan 2018 - Received two 1099R; one for Roth IRA and another for Traditional IRA This is likely correct.  The one for the Roth would likely have had code N in box 7 showing that it was for a recharacterization.  The one for the Trad-IRA would likely have had code 2 in box 7-- early distribution, exemption applies (since it was a conversion).
  7. Apr 2018 - Filed 2017 taxes, included both 1099R, one for re-characterization, one for conversion
    1. Entered in Income and Adjustments section . Yes, you should have entered both the 1099Rs. The taxable amount of the conversion would depend on the total amounts in all of your Trad-IRA type accounts (listed above) and the proportion in those accounts that was deductible vs non-deductible.  When you go through the Income and Adjustments section of the software, you need to be VERY careful about entering the numbers it's asking about accurately to get this right. I'm happy to answer with more specifics if you have other Trad-IRA accounts that you weren't converting. 

 

Is this correct? 

 

Thanks,

Ashwin