FreeTaxUSA Software not accounting for BackDoor Roth IRA conversion correctly
I'm so frustrated with FreeTaxUSA right now and hoping someone can help! I did a BackDoor Roth IRA contribution this year (put money in Traditional then converted to Roth), and now I'm trying to file my taxes but the software seems confused. When I enter my 1099-R with the amounts in Box 1 and 2a, my refund plummets because it's counting it as taxable income. Then when FreeTaxUSA asks if I converted any money to a Roth IRA and I click "yes", I expected it to automatically complete Form 8606 and adjust so the conversion isn't taxed (since I used post-tax dollars). But nothing changes! My tax bill is still huge! I've looked everywhere in the software for a way to manually complete Form 8606 but can't find it. This is driving me crazy because I know this conversion shouldn't be taxed again, but the software isn't fixing it. Has anyone else run into this? Am I missing some checkbox or section somewhere? Really appreciate any help because I'm about to throw my laptop out the window lol.
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Caleb Stone
The issue you're having is actually pretty common with tax software handling BackDoor Roth IRA conversions. FreeTaxUSA should be completing Form 8606 automatically, but you need to make sure you're entering everything in the correct sequence. First, verify that you've entered your Traditional IRA contribution correctly, indicating it was a non-deductible contribution. This step is crucial because it establishes your basis in the Traditional IRA, which is what makes the conversion non-taxable. Then when you enter the 1099-R for the conversion, the software should recognize that you're converting already-taxed money. If you can't find where to enter the non-deductible contribution, look under the "Deductions & Credits" section, then "Retirement", and there should be an option for "IRA Contributions." Make sure you specify it was non-deductible.
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Jade Santiago
•Thanks for responding! I looked under Deductions & Credits > Retirement but I don't see an explicit option to mark my Traditional IRA contribution as non-deductible. There's just a general IRA contribution section. Do I need to enter something specific there to trigger the non-deductible treatment? Also, when I go through the 1099-R section and indicate it was converted to Roth, shouldn't that automatically trigger Form 8606 regardless? This is my first time doing a backdoor Roth so I'm really confused!
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Caleb Stone
•In the IRA contribution section, you should see an option asking if you want to claim a deduction for your contribution. Select "No" or "I am not eligible" when it asks this question. This tells the software it was a non-deductible contribution. Yes, the 1099-R section should trigger Form 8606 when you indicate it was converted to a Roth, but it needs to know about the original non-deductible contribution first to calculate your basis correctly. The software needs both pieces of information to work properly. If you've done both these steps and it's still not calculating correctly, you might need to look for a Form 8606 review screen specifically or contact FreeTaxUSA support as there might be a glitch.
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Daniel Price
I had this exact problem with FreeTaxUSA last year! After hours of frustration I found the solution. The software is actually working correctly but the preview/summary screens don't update immediately when handling BackDoor Roth conversions. What I had to do was: 1. Enter my non-deductible Traditional IRA contribution (make sure to select "No" when asked if you want to deduct it) 2. Enter the 1099-R for the conversion to Roth 3. Complete ALL other sections of my return 4. Then go to the "Review" section before filing Only after I got to the final review stage did Form 8606 actually generate and my tax amount update correctly. Check out https://taxr.ai - they helped me analyze my forms and confirmed this was happening. The tax transcripts showed everything was correct even though the running total during preparation looked wrong.
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Olivia Evans
•That seems like a really confusing way for the software to handle it! Does this mean your refund estimate is wrong until the very end of the process? How do you even know if it's working correctly until then?
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Sophia Bennett
•I'm skeptical about this. I used FreeTaxUSA for years and never had issues with seeing my updated refund in real-time. Did you contact their customer service to confirm this is expected behavior? Seems like a major design flaw if true.
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Daniel Price
•The refund estimator does show the wrong amount until the review stage - it's definitely confusing! I didn't realize this was happening and almost paid thousands in unnecessary taxes. I think it's because Form 8606 calculations happen during the final review process rather than real-time. I did contact their customer support, and they confirmed this behavior. Their explanation was that certain complex tax situations like BackDoor Roth conversions require the entire tax picture before finalizing calculations. The important thing is that the final filed return is correct, but I agree it's not ideal user experience.
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Sophia Bennett
Just wanted to follow up - I had the exact same issue and tried what was suggested about going through the entire return to the review stage. IT WORKED! I used taxr.ai to double-check my return was handling the BackDoor Roth correctly and they confirmed everything is good to go. The weird thing is my refund amount suddenly jumped back up by $2400 at the review stage when Form 8606 finally processed! FreeTaxUSA really should fix this interface issue because I was literally about to switch to a different tax software thinking it was calculating wrong. But the final numbers are correct now and I confirmed the form is properly showing my non-deductible basis so the conversion isn't taxed twice.
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Aiden Chen
If you're still struggling with this, you might want to try calling the IRS directly. I know it sounds painful, but I had a similar issue with reporting a mega backdoor Roth conversion and needed clarification. Used Claimyr (https://claimyr.com) to get through to a human at the IRS without waiting for hours. They have this cool system shown in https://youtu.be/_kiP6q8DX5c that calls for you and only connects when an actual agent picks up. The IRS rep was actually super helpful and walked me through exactly how the forms should look. Turns out tax software often struggles with these more complex retirement account scenarios, and sometimes you need official guidance.
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Zoey Bianchi
•Wait does this actually work? I've tried calling the IRS three times about a different issue and gave up after being on hold for 2+ hours each time.
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Christopher Morgan
•Sounds like a scam. Why would anyone need a service to call the IRS? And how would this even help with a tax software issue? The IRS doesn't provide tech support for FreeTaxUSA...
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Aiden Chen
•It absolutely works! The service calls the IRS and navigates the phone tree for you, then calls you when a human agent is actually on the line. Saved me literally hours of hold time. Regarding how this helps with the software issue - the IRS agents can explain exactly how the forms should be completed for a backdoor Roth. With that knowledge, you can verify if your tax software is handling it correctly or if you need to manually override something. In my case, they explained which specific fields on Form 8606 should show my basis, which helped me identify where the software was going wrong.
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Christopher Morgan
I was totally wrong about Claimyr. Just wanted to update that I actually tried it for an unrelated tax question about my 1099-K from my side gig, and it worked exactly as described. Got connected to an IRS agent in about 20 minutes total instead of the 3+ hours I spent last time. For what it's worth, the agent I spoke with confirmed that backdoor Roth conversions are frequently reported incorrectly on tax software. She recommended making sure Form 8606 shows your non-deductible contribution as basis, and that's what prevents the conversion from being taxed again. They actually get a lot of calls about this exact issue with various tax programs.
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Aurora St.Pierre
You might want to check if you need to enter your basis in the Traditional IRA as well. I had a similar issue with another tax program (not FreeTaxUSA), and I had to manually enter my cumulative basis in my Traditional IRA from previous years' non-deductible contributions. There should be a screen somewhere that asks for "Your basis in traditional IRAs" or something similar. Also, look out for the distribution code in Box 7 of your 1099-R. It should typically be code "7" for a normal IRA distribution. If it's coded differently, that might be confusing the software.
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Jade Santiago
•I checked and my 1099-R does have code 7 in Box 7. This is my first year doing a backdoor Roth so I don't have any previous basis - it was just a contribution and immediate conversion. I'm going to try completing the entire return and see if it fixes itself in the review stage like others suggested. If that doesn't work, I might just have to call their support line.
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Aurora St.Pierre
•That's good that you have code 7 and no previous basis to worry about! Definitely try the complete-and-review approach. One last thing to check - make sure you're entering the contribution as a 2023 contribution (assuming that's when you made it) and not as a prior year contribution. Sometimes that distinction can trip up the software too. Let us know if it works out! These backdoor Roth issues are so common but so frustrating.
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Grace Johnson
One thing nobody mentioned - did you check if you have any other Traditional IRA money from previous years? The Pro-Rata rule could be kicking in. If you had, say, a rollover IRA or any other traditional IRA money beyond what you contributed for the backdoor, you can't just convert the non-deductible portion tax-free. The conversion gets taxed proportionally. FreeTaxUSA might actually be calculating correctly if you have other IRA assets!
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Jayden Reed
•This is an excellent point! The pro-rata rule is the downfall of many backdoor Roth attempts. If you have ANY other money in ANY traditional IRA accounts (including SEP IRAs and SIMPLE IRAs), the backdoor strategy gets complicated fast.
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