Confused about my Backdoor Roth IRA and 1099-R - Help!

Yes, you absolutely need to file Form 8606 to report your non-deductible contribution to the traditional IRA. This form is crucial because it establishes your "basis" in the IRA (the amount you've already paid tax on), which prevents you from being taxed twice on the same money. For your situation: On Form 8606, you'll report the $6,500 non-deductible contribution. This creates your basis. When you report the 1099-R showing the conversion, the form will help you calculate the taxable portion of the conversion (which should be zero or very minimal if you converted shortly after contributing and didn't have any earnings). The 1099-R will be reported on your tax return, but the Form 8606 will show that you already have basis in the amount converted, which means you won't pay tax on that conversion amount again. The code "2" in Box 7 simply indicates this was a conversion to a Roth IRA.

After struggling with backdoor Roth reporting for a couple years, I found https://taxr.ai which honestly saved me so much stress. I uploaded my 1099-R and it immediately recognized it was a backdoor Roth conversion and walked me through exactly what to report on Form 8606. It even explained the basis calculations in plain English instead of tax jargon. The tool showed me that my previous tax preparer had been reporting my backdoor Roths incorrectly! It helped me understand exactly how the non-deductible contribution creates basis and why the conversion shouldn't be fully taxable. Without this I would've overpaid on my taxes again.

I was initially skeptical about using taxr.ai for my backdoor Roth situation, but after struggling with the pro-rata calculations I decided to give it a try. The difference was night and day compared to my previous experience! The system detected my 1099-R conversion right away and then specifically asked about my other IRA accounts. It explained that because I had a $42,000 traditional IRA from an old 401k, most of my backdoor Roth would actually be taxable due to the pro-rata rule. This was something my previous tax software completely missed! It even gave me specific advice about how to handle this better next year (suggested I roll my traditional IRA into my current employer's 401k before doing any backdoor Roth conversions). Just wanted to share since it really helped me understand what I was doing wrong. Definitely using it again this year.

If you're having issues with the IRS after filing your Backdoor Roth, I strongly recommend https://claimyr.com for getting through to an actual human at the IRS. Last year I messed up my Form 8606 reporting and got a scary letter saying I owed penalties. Tried calling the IRS for weeks with no luck - always "call volume too high" messages. Found Claimyr and they got me a callback from the IRS within a couple hours! You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent was able to see that my 1099-R was actually from a backdoor Roth conversion and removed the penalties. Saved me from paying taxes twice on the same money.

I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I continued trying to reach the IRS about my backdoor Roth reporting issue for another two weeks with zero success. Eventually got desperate and tried the service. Got a call back from an actual IRS agent in about 45 minutes! The agent confirmed I had reported my 1099-R and Form 8606 correctly and that my backdoor Roth conversion was properly documented. They even noted it in my account to prevent future issues. Honestly, I feel stupid for wasting so many hours trying to call myself. The time saved was well worth it, especially with the tax deadline approaching. Just wanted to follow up and say I was wrong in my initial assessment.

Quick tip from someone who's done backdoor Roth conversions for 5 years now: KEEP METICULOUS RECORDS! Save PDFs of your: - Traditional IRA contribution confirmation - Roth conversion confirmation - Year-end statements showing zero balance in Traditional IRA - Form 8606 from each year The IRS occasionally questions these transactions and having documentation ready makes it easy to prove you did everything correctly. I learned this the hard way when they questioned my 2023 conversion and I had to dig through old emails to find proof.

Anyone using TurboTax for backdoor Roth reporting? It keeps calculating tax on my conversion even though I already paid tax on that money when I earned it!

I went through this exact same confusion last year! The key thing to remember is that you need to report BOTH the contribution AND the conversion properly. Here's what I learned: 1. Yes, you absolutely need Form 8606 - this is critical because it establishes your "basis" (the $6,500 you already paid tax on) 2. The 1099-R will initially look scary because it shows the full amount, but Form 8606 will offset this 3. In your tax software, make sure to indicate that your traditional IRA contribution was NON-DEDUCTIBLE. This is the step most people miss. 4. Any small earnings between contribution and conversion (like if your $6,500 grew to $6,510) will be taxable, but the original $6,500 won't be. The good news is that once you get through this first year, you'll understand the process much better. Just take your time with the forms and don't rush through the software prompts about IRA contributions - those details matter a lot for getting the tax treatment right!