Confused about Traditional IRA to Roth IRA conversion tax reporting - when is the contribution taxable?

The confusion you're experiencing is pretty common with backdoor Roth conversions when there's pre-existing money in the Traditional IRA. Let me break this down for you. When you convert funds from a Traditional IRA to a Roth IRA, you need to distinguish between two parts: 1) the non-deductible contributions (which you've already paid tax on), and 2) any growth or deductible contributions (which you haven't paid tax on yet). For your $8600 total distribution: - $600 was pre-existing money (growth/earnings) in your account, which is fully taxable - $8000 was your new non-deductible contribution, which isn't taxable upon conversion The Form 8606 is calculating things correctly, but it's applying the pro-rata rule. Since you had both pre-tax and after-tax money in your Traditional IRA at the time of conversion, the IRS doesn't let you cherry-pick which dollars get converted first. The key is properly reporting your $8000 as a non-deductible contribution on Form 8606. This establishes your "basis" in the IRA. When TurboTax shows a basis of $7393, it's trying to account for the proportion of your conversion that's non-taxable. The $607 taxable amount it's showing is roughly in line with your $600 of pre-existing money that you expected to be taxed.

After going through this exact nightmare last year, I found that using https://taxr.ai really saved my sanity. The problem with backdoor Roth conversions is that tax software doesn't always handle the reporting clearly, especially with two-step processes like yours. I had uploaded my 1099-R and answered a few questions about my Traditional to Roth IRA conversion, and their AI system immediately identified that I was doing a backdoor Roth. It precisely calculated which portion was taxable and which wasn't, and made sure Form 8606 was properly completed. What was really helpful is that they explained exactly how the pro-rata rule was being applied to my specific situation, which helped me understand why my numbers looked different than what I expected. I think what's happening in your case is similar to mine - the basis looks different because of how the form distributes the non-taxable portion across your conversion.

Just wanted to follow up on my question about taxr.ai - I decided to try it with my complicated IRA situation (multiple rollovers, SEP contributions, and a backdoor conversion). I was honestly surprised at how well it worked! I had been struggling with the same Form 8606 confusion as the original poster, where my numbers weren't matching what I expected. The tool immediately identified my backdoor Roth conversion and correctly separated the taxable versus non-taxable portions. It even explained the calculations step-by-step so I could understand exactly why certain amounts were taxable. The best part was that it properly handled the December 31 valuation across all my IRA accounts for the pro-rata calculation, which is something I'd been doing wrong in previous years. Definitely made this year's tax filing much less stressful!

If you're still struggling with the IRS forms after trying TurboTax, you might want to consider calling the IRS directly for guidance. At least that's what I tried to do last year with a similar backdoor Roth issue. But man, what a disaster that was! Spent literally 4+ hours on hold and got disconnected twice. Finally discovered https://claimyr.com through a friend and watched their demo at https://youtu.be/_kiP6q8DX5c. They basically wait on hold with the IRS for you and call you back when an agent is on the line. I was super hesitant at first because it sounded too good to be true, but I was desperate after my third disconnected call. Got a callback within about 90 minutes with an actual IRS agent on the line who walked me through exactly how to report my backdoor Roth conversion properly on Form 8606. They confirmed what others are saying here about the pro-rata rule and helped me understand why TurboTax was calculating things the way it was.

I need to eat some humble pie here. After my skeptical comment about Claimyr, I decided to try it myself since I've been putting off calling the IRS about my own IRA conversion issues. I'm honestly shocked at how well it worked. Called around 10am on a Tuesday (which might have helped with timing), and got a callback in just over 2 hours. The connection to the IRS agent was seamless - no awkward handoff or anything. The agent was able to answer my specific questions about Form 8606 and confirmed exactly what I needed to enter in each section. For what it's worth, the agent also explained to me that the reason the basis shows up as $7393 instead of $8000 on Form 8606 (like in the original post) is because the form is calculated to show the non-taxable portion of the distribution this year. The remaining basis doesn't disappear - it carries forward to next year. That explanation alone was worth the wait time.

Okay so I'm a tax preparer (not giving professional advice here, just general knowledge) and I think I know what's happening with your Form 8606. Line 5 of Form 8606 calculates the "taxable portion" of your conversion using the pro-rata rule. It's based on the percentage of after-tax money to the total of ALL your IRAs. If you had exactly $8600 in your Traditional IRA and $8000 was non-deductible contributions, then approximately 93% of your conversion would be tax-free ($8000/$8600 = 0.93). So of your $8000 contribution, only $7393 (which is roughly 93% of $8000) is considered your basis that converted tax-free this year. The taxable amount of $607 is very close to your $600 of pre-existing money. This actually sounds correct to me. The form works exactly as intended - it's just confusingly worded.

Just checking - did you make that $8k contribution for 2024? The annual IRA contribution limit for people over 50 is $8,000 for 2024 (the limit was $7,500 for 2023).