A backdoor Roth IRA is a great savings strategy, but only if done correctly!

When filing your taxes, make sure you are not being taxed on the conversion. This video is brief walkthrough on the prompts within TurboTax, as well as a review of the Forms 8606 and Form 1040 to confirm the conversion was completed correctly.

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**This video is for educational purposes only. Please speak with a qualified financial or tax professional before implementing**…(read more)

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When it comes to retirement savings, a Roth IRA is a popular choice for many individuals. It offers tax-free growth and withdrawals in retirement, making it an attractive option for anyone looking to build a nest egg for their golden years. But what if you exceed the income limit for contributing to a Roth IRA? That’s where the “backdoor” Roth IRA comes in. This strategy involves making a non-deductible contribution to a traditional IRA and then converting it to a Roth IRA.

If you’re considering the backdoor Roth IRA, you’ll want to make sure you properly report the contribution and conversion in your tax return. Using TurboTax is a convenient and efficient way to do this. Here’s a guide to properly completing a backdoor Roth IRA in TurboTax.

Step 1: Report your non-deductible traditional IRA contribution

The first step in the backdoor Roth IRA process is to make a non-deductible contribution to a traditional IRA. When you’re entering this in TurboTax, you’ll want to navigate to the “Deductions & Credits” section and select “I’ll choose what I work on”. Then select “Retirement” and click on “IRA, SEP, SIMPLE”. Here, you’ll have the option to enter your traditional IRA contribution. Make sure to indicate that this is a non-deductible contribution to ensure it’s reported accurately on your tax return.

Step 2: Report the Roth IRA conversion

After making the non-deductible contribution to your traditional IRA, you’ll convert it to a Roth IRA. To report this in TurboTax, you’ll again navigate to the “Deductions & Credits” section and select “I’ll choose what I work on”. Then select “Retirement” and click on “IRA, SEP, SIMPLE”. You’ll find an option to report a Roth IRA conversion, where you can enter the details of the conversion. TurboTax will guide you through the process and ensure that the conversion is properly reported on your tax return.

Step 3: Account for any pre-tax IRA balances

If you have any pre-tax IRA balances, such as from a rollover or deductible contributions, it’s important to account for these when completing the backdoor Roth IRA in TurboTax. This is because the IRS considers all of your traditional IRA balances when calculating the tax impact of a Roth conversion. TurboTax will prompt you to enter information about your pre-tax IRA balances, and it will factor this into the tax treatment of your Roth conversion.

Step 4: Review and file your tax return

Once you’ve entered all the necessary information for your backdoor Roth IRA in TurboTax, it’s essential to review your tax return before filing. Double-check that the non-deductible traditional IRA contribution and Roth conversion are accurately reported, and ensure that any pre-tax IRA balances are properly accounted for. Once you’re confident that everything is in order, you can proceed to file your tax return.

Completing a backdoor Roth IRA in TurboTax is a straightforward process, but it’s essential to ensure that you accurately report the contribution and conversion to avoid any potential tax issues. By following these steps and using TurboTax’s guidance, you can confidently navigate the backdoor Roth IRA strategy and maximize your retirement savings potential.