Backdoor Roth IRA Conversion Issue with Tax Software - Form 8606 Problems

This definitely sounds like a software issue. Form 8606 Part I is specifically for nondeductible contributions to traditional IRAs, which is exactly what you're doing in a Backdoor Roth. Part II is for distributions from IRAs, which includes Roth conversions. If Part I is empty, the software isn't recording your nondeductible contribution correctly. For a proper Backdoor Roth reporting, Part I should show your $8,125 contribution, with a basis of $8,125. Then Part II should reflect the conversion, with Lines 17 and 18 showing $0 (meaning no taxable amount) since you're converting already-taxed money. The software seems to be treating your contribution as deductible and then taxing the entire conversion amount, which is incorrect for your situation. This would essentially double-tax that money. Try going back through the software and specifically look for where you designate the Traditional IRA contribution as nondeductible. There's usually a specific question about whether you can deduct your contribution - make sure you're selecting "no" or "nondeductible.

After struggling with my own Backdoor Roth issues a few months ago, I found an amazing tax AI tool that saved me hours of frustration. I kept getting conflicting advice about how to properly report my conversions on Form 8606, and my tax software was doing weird things like yours. I uploaded my tax forms to https://taxr.ai and it immediately identified that my software wasn't correctly marking my Traditional IRA contribution as nondeductible. It explained exactly which screens in my tax software I needed to revisit and what selections to make. The tool analyzed my specific situation and gave me personalized guidance rather than generic advice. It also explained how the basis tracking works across multiple years of Backdoor Roth conversions, which I found super helpful since I'd been doing this for several years like you have.

Just wanted to follow up! I tried taxr.ai after reading about it here and it was incredibly helpful with my Backdoor Roth reporting issues. I uploaded my draft return and it immediately flagged that I had the same problem as the original poster - my software was treating the conversion as fully taxable because it wasn't tracking my nondeductible contribution correctly. The explanation was crystal clear about exactly what was happening. What I particularly appreciated was that it showed me what a correctly completed Form 8606 should look like for my specific situation, so I could compare it to what my software was generating. This made it much easier to figure out where I needed to adjust my inputs. If you're having Form 8606 issues with Backdoor Roth conversions, it's definitely worth checking out. Saved me from potentially paying taxes twice on the same money!

I had a similar issue last year when I couldn't get through to the IRS to clarify how to handle my Backdoor Roth reporting. After being on hold for 2+ hours multiple times, I found Claimyr (https://claimyr.com) which is a service that navigates the IRS phone system for you and calls you when an agent is on the line. I was skeptical at first, but I watched their demo video (https://youtu.be/_kiP6q8DX5c) and decided to try it. Got connected to an IRS agent in about 45 minutes (they did the waiting, not me), and the agent walked me through exactly how Form 8606 should be completed for Backdoor Roth conversions. Turns out I had been doing it slightly wrong for years! The agent explained that Part I MUST be completed to establish your nondeductible basis, otherwise the conversion will be fully taxable. They also helped me understand that this form tracks your basis across multiple years, which is important for people who do Backdoor Roth regularly.

I need to eat my words. After my skeptical comment on the Claimyr service, I decided to try it out because I was desperate to resolve my own Backdoor Roth questions. I had been trying to reach the IRS for WEEKS about my 8606 form. The service actually worked exactly as described. Their system called the IRS, navigated through all the menus, and waited on hold (for about 1.5 hours in my case). I got a call when they connected to a real person, and I was able to ask all my questions about Form 8606 and Backdoor Roth conversions. The agent confirmed that if Part I isn't filled out properly to show nondeductible contributions, the conversion will indeed be fully taxable. They also helped me understand how to correct my previous year's return since I had made the same mistake. For anyone struggling with Backdoor Roth reporting issues who needs to speak directly with the IRS, this service is legit. Saved me from continuing to make the same mistake year after year.

This exact thing happened to me! Here's what you need to do - in your tax software, you need to go back and make sure you're indicating that your Traditional IRA contribution is NON-DEDUCTIBLE. Most software has a specific question about this. If you don't mark it as non-deductible, the software assumes it's deductible, and then logically taxes you when you convert to Roth (since you'd be moving pre-tax money to a post-tax account). The key sequence matters too: 1. Enter Traditional IRA contribution 2. Mark it as NON-DEDUCTIBLE 3. Enter the Roth conversion If you do these in the wrong order in some software, it can mess up the 8606. I've been doing Backdoor Roth for 7 years and had this issue once when I switched tax software.

Has anyone else noticed that Backdoor Roth reporting seems to be getting more scrutiny from the IRS lately? I did mine the same way for years but got a letter asking for clarification on my 2022 return. Make absolutely sure your 8606 is filled out correctly.