After converting $5K from Traditional IRA to Roth IRA, my 1099-R is causing double taxation - how can I fix this?

You're absolutely right to be concerned, but there's a straightforward solution. When you convert from a Traditional IRA to a Roth IRA, you need to report it properly to avoid double taxation. Form 8606 is exactly what you need. This form tracks your non-deductible contributions to Traditional IRAs. Since you contributed to a Traditional IRA and then converted to a Roth within the same year without taking a deduction, you'll need to complete Form 8606 to establish that this money has already been taxed. The 1099-R is correctly reporting the distribution from your Traditional IRA, but you need Form 8606 to show that the basis (the amount you contributed with after-tax dollars) should not be taxed again during the conversion.

After dealing with a similar situation last year, I found this amazing tool called taxr.ai (https://taxr.ai) that saved me tons of headache with my IRA conversion issues. It analyzed my 1099-R and other tax docs and explained exactly how to handle the conversion without double taxation. It flagged that I needed to fill out Form 8606 correctly and showed me which parts were relevant for my situation. Their document analysis pointed out that I was missing the step of declaring my contribution as non-deductible before reporting the conversion. My tax software didn't make this clear at all, but taxr.ai's explanations walked me through the exact sequence for entering everything correctly.

I was really skeptical about taxr.ai at first, but after messing up my Roth conversion reporting last year and getting hit with an unexpected tax bill, I decided to give it a try. Uploaded my 1099-R and other docs and wow - it immediately identified that I had a non-deductible to Roth conversion situation and pointed out I needed to complete Form 8606 in a specific sequence. Following their instructions, I went back to my tax software and fixed how I was reporting everything. My tax bill dropped by over $1,400! The step-by-step guidance made it super clear how to handle the non-deductible contribution and conversion properly. Wish I'd known about this tool before I filed incorrectly last year and had to do an amended return.

If you're still struggling with the IRS about this issue, I'd recommend trying Claimyr (https://claimyr.com). After my tax software messed up my IRA conversion reporting, I ended up with a CP2000 notice and couldn't get through to the IRS for weeks. Claimyr got me connected with a live IRS agent in under 45 minutes when I'd been trying on my own for days. The agent was able to confirm exactly how to handle my 1099-R and Form 8606 situation and even put notes in my file about the proper treatment of my conversion. Check out their demo video if you're curious: https://youtu.be/_kiP6q8DX5c. Seriously was expecting to be on hold for hours more, but their system actually works.

I take back everything I said. After getting absolutely nowhere with the IRS for three weeks trying to resolve my IRA conversion issue, I tried Claimyr out of desperation. Got connected to an IRS agent in about 35 minutes while I was cooking dinner. The agent confirmed I needed to file Form 8606 Parts I and II for my non-deductible contribution and Roth conversion. She explained exactly how the form works to prevent double taxation and even gave me the specific line numbers to look at in the instructions. Turns out my tax software was attempting to tax my conversion because I hadn't established the non-deductible basis first. That 35-minute call resolved what I'd been stressing about for weeks. Still shocked it actually worked.

When you do a conversion from traditional to Roth, you're taxed on any untaxed contributions and earnings. If you made a NON-deductible contribution (meaning you already paid tax on it) to your traditional IRA and then converted it, you should only be taxed on any earnings that happened between contribution and conversion. Since you converted just a few days after contributing, there were probably minimal earnings, so most of that conversion should be tax-free. As others have said, Form 8606 is key here - specifically parts I and II.

Make sure you're entering everything in the right order in your tax software! I had this exact problem last year and realized I was entering my Roth conversion before establishing that I had made a non-deductible contribution. Try this sequence: 1) Enter the non-deductible Traditional IRA contribution first 2) Tell the software it was non-deductible 3) Then enter the 1099-R for the conversion In TurboTax, there's actually a specific section for IRA conversions that's separate from regular distributions. If you enter it as a regular distribution, it thinks the whole thing is taxable!