Starting from February every year, I spend hours going over my tax files. It’s not that my tax preparation is that complicated as both my wife and I have W2s, but I hate the thought of making a mistake that I need to come back to fix in the future. Or even worse, not noticing a mistake until a few years down the road. My wife and I have only contributed to backdoor Roth in the last three years. But in that time, filing our backdoor Roth IRA correctly has been the most challenging part of filing taxes. I’ve had headaches each year due to various mistakes I’ve made.
Unfortunately, neither H&R Block nor TurboTax offers intuitive ways to file backdoor Roth. I use H&R Block because it is a little cheaper than TurboTax. In this post, I will show you the step by step instructions on how to correctly file for your backdoor Roth IRA for 2017 contributions.
There are three major section you need to fill out correctly.
- Federal -> Income -> 1099 R Retirement Plan
- Federal -> Adjustment & Deduction -> Traditional or Roth IRA contribution
- Federal -> Adjustment & Deduction -> IRA conversion (Form 8606)
Start IRA reporting from Federal -> Income -> 1099R tab. You can import your 1099R form or manually enter the form.
I made up this negative number. The point here is that you will see that your tax return decrease once you fill out your Federal-> Income -> 1099 R. Don’t panic. This amount will be corrected once you finish Federal -> Adjustment & Deduction section.
Onto the next section: Federal -> Adjustment & Deduction -> Traditional or Roth IRA contribution
In the next page (not shown here), H&R Block will ask you to enter your TIRA history. Go ahead and fill it out, it can help you to keep track of your contribution history. It’s for H&R Block record keeping, not for IRS to see.
No direct Roth contributions but you should have money in your Roth IRA account as you did a conversion in 2017. You should enter here the total sum of your Roth IRA account value.
In the next page (not shown here), you will be asked to enter your Roth IRA contribution history. Like the TIRA history, you should only enter your direct contributions to avoid confusion.This page is for H&R Block’s record keeping.
Finally, we need to fill out the third section: Federal -> Adjustment & Deduction -> IRA conversion (Form 8606)
Now check the box on the upper left hand of your screen. Your Backdoor Roth IRA should cost you $0 since you contributed with post tax dollars. If you have basis or if your contributions had growth before your conversion, you are responsible for taxes. That’s it! You’ve done the hard work of filling out your tax return on your backdoor Roth IRA. Before you go, there is one more critical step which is to verify that you did everything correctly.
At the end of your tax return before you file it to IRS, H&R Block will allow you to look at the paper form of your tax return. You should always go to your Form 8606 to confirm that it’s filled out correctly. White Coat Investor has a great post on a sample correctly filled out Form 8606 here. I strongly suggest you compare it with your form to make sure they match in every box before filing it to IRS.
What do you think? Is this helpful? Leave me a comment.