TurboTax Help: Backdoor Roth IRA Contribution in 2020

The backdoor Roth Individual Retirement Account (IRA) strategy is a popular way to contribute to a Roth IRA, even if your income exceeds the eligibility limit. In this article, we will walk you through the steps of contributing to a Roth IRA using TurboTax and answering the questions about basis, nondeductible contributions, and recharacterization.

Contributions in 2020

Before we begin, let's review the contributions made in 2020. You contributed $6,000 to your Roth IRA in 2020, and you also made a $2,250 contribution for the year 2021. Since you exceeded the income limit, you will need to answer questions about basis, nondeductible contributions, and recharacterization.

Entering Basis Information

In TurboTax, navigate to the 'Your 1099-R Entries' screen and click on 'Continue.' Then, choose 'I did a combination of rolling over, converting, or cashing out money' and enter the amount next to 'Amount converted to a Roth IRA account.' Answer the questions until you get to 'What Did You Do With The Money' and select 'I moved it to another retirement account.'

Recharacterization

On the 'Did You Change Your Mind?' screen, answer 'No' to the recharacterization question. This means that you did not change your mind about the contribution and want to keep it as a Roth IRA.

Nondeductible Contributions

Enter your basis in the traditional IRA from your 2020 Form 8606 line 14 (if you had a basis in the prior year). Then, answer the next questions until you get to 'Any Nondeductible Contributions to Your IRA?' and select 'Yes' if you had nondeductible contributions before this tax year.

TurboTax Tips

When entering your information in TurboTax, make sure to choose the correct form (Form 1099-R) and answer the questions accurately. Also, ignore Form 1099-R with code R since you reported the recharacterization on your 2020 tax return.

In conclusion, contributing to a Roth IRA using the backdoor strategy requires careful attention to basis, nondeductible contributions, and recharacterization. By following these steps and answering the questions accurately in TurboTax, you can successfully contribute to a Roth IRA even if your income exceeds the eligibility limit.

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