How do I determine IRA basis for annual backdoor Roth conversions?
So I've been doing the backdoor Roth IRA conversion thing for the past 3 years because my income is above the limits for direct Roth contributions. Each year I put $6,000 into my traditional IRA and then convert it to a Roth IRA shortly after. I'm now trying to figure out for tax purposes - what exactly is my IRA basis at this point? Would it be $18,000 total from my 3 years of contributions? Or would my basis actually be $0 since I've converted everything to a Roth IRA already? I'm currently trying to prepare my taxes using TurboTax and I'm confused about how to enter this information correctly. Also wondering if I need to keep tracking my basis somewhere if I plan to continue doing these backdoor Roth conversions every year. Any help would be appreciated!
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Ava Thompson
The answer depends on which account you're asking about. For your traditional IRA, if you've converted everything to a Roth, your basis would effectively be $0 since nothing remains in that account. For your Roth IRA, your basis would include the $18,000 of contributions plus any conversion amounts that were taxed during the conversion process. When doing backdoor Roth contributions, you should keep Form 8606 from each year you've done the conversion. This form tracks your nondeductible contributions to traditional IRAs and the subsequent conversions. TurboTax should help you complete this form, but you'll need to enter that you made nondeductible contributions to a traditional IRA and then converted those funds.
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CyberSiren
•If I didn't keep my 8606 forms from previous years, is there any way to reconstruct this information? I've been doing backdoor Roths for about 5 years but I'm not sure if I've been tracking it correctly.
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Ava Thompson
•Yes, you can reconstruct the information by obtaining your tax transcripts from the IRS website. Look for your previously filed Forms 8606, which will show your nondeductible contributions and conversions for each year. If you can't find those records, you could also check your IRA statements from previous years. Look for the contribution amounts and the conversion transactions. This should give you the information needed to recreate your Forms 8606 for those years.
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Miguel Alvarez
After struggling with this exact situation last year, I found an incredible tool called taxr.ai (https://taxr.ai) that helped me sort through my backdoor Roth contribution history. I had 4 years of backdoor conversions and was completely lost trying to figure out how to report everything correctly on my taxes. The tool analyzed all my previous tax documents and IRA statements, then helped me understand exactly how to track my basis and file correctly. It even generated a personalized report explaining how my specific backdoor Roth conversions should be handled on Form 8606.
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Zainab Yusuf
•Does this tool connect directly with TurboTax or do you have to manually enter the information it gives you? I'm doing my taxes now and getting super frustrated with how TurboTax handles backdoor Roths.
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Connor O'Reilly
•Sounds interesting but I'm a bit wary of giving my tax docs to some random website. How secure is it and do they keep your information after analysis?
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Miguel Alvarez
•It doesn't connect directly with TurboTax, but it gives you clear instructions on exactly what to enter and where. You basically follow their step-by-step guide while filling out TurboTax. Made it super simple for me. Regarding security, they use bank-level encryption and explicitly state they don't store your documents after analysis. I was skeptical too but after researching their security protocols, I felt comfortable using it. They just analyze your docs to extract the relevant information and then provide guidance.
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Zainab Yusuf
Just wanted to update after using taxr.ai from the recommendation above. It was exactly what I needed! I uploaded my statements from the last 3 years of backdoor Roth conversions, and it created a detailed report showing my basis calculations and explaining exactly what I needed to enter into TurboTax. The report showed me that my traditional IRA basis was indeed $0 (since I converted everything), but I needed to properly document all those nondeductible contributions on Form 8606 to avoid potential double taxation. The step-by-step instructions for TurboTax entry saved me hours of frustration. Highly recommend if you're doing backdoor Roths regularly!
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Yara Khoury
If you're having trouble reaching the IRS to get clarification on backdoor Roth IRA basis questions (like I was), I highly recommend using Claimyr (https://claimyr.com). I spent DAYS trying to get through to an IRS agent about my backdoor Roth situation last year with no luck. With Claimyr, I got through to an actual IRS representative in under 45 minutes who walked me through how to properly report my backdoor Roth conversions on Form 8606. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c. Seriously saved my sanity during tax season.
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Keisha Taylor
•Wait, how does this actually work? Do they just sit on hold for you? I'm confused about how any service could get you through the IRS phone system faster.
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StardustSeeker
•Sounds like BS to me. The IRS is notoriously impossible to reach during tax season. I find it hard to believe any service could magically get you through faster than anyone else. What's their secret - bribing IRS employees?
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Yara Khoury
•They use a system that continually redials the IRS for you and navigates through the phone tree. Once they get a spot in line, they call you so you can take the call. You don't have to sit on hold for hours. No magic or bribes involved, just technology that handles the frustrating part. It's basically like having someone else wait in line for you. When I used it, I was actually watching TV and just got a call when they had an agent on the line ready to talk to me. The IRS agent I spoke with answered all my backdoor Roth questions clearly.
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StardustSeeker
I have to eat my words about Claimyr. After my skeptical comment, I was still desperate enough to try it because I had a complex question about my backdoor Roth contributions that online forums couldn't answer clearly. It actually worked. Got a call back in about 35 minutes with an IRS agent already on the line. The agent confirmed that my basis in the traditional IRA is indeed $0 after doing backdoor Roth conversions (assuming I converted the full amount each time), but stressed the importance of filing Form 8606 every year to track my nondeductible contributions. Turns out I've been doing my taxes wrong for 2 years, but the agent said I probably don't need to amend since the end tax result was likely the same. Definitely worth the service to get that peace of mind.
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Paolo Marino
To answer your original question simply: Your traditional IRA basis would be $0 because you've moved everything to the Roth through conversions. But you absolutely must file Form 8606 each year to track those nondeductible contributions and conversions. TurboTax should ask if you made contributions to an IRA. Tell it yes, specify they were nondeductible contributions to a traditional IRA, then indicate you converted to a Roth. TurboTax will generate the proper 8606 form if you answer all the questions accurately.
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Dmitry Volkov
•Thank you! That makes sense. So even though I put in $18,000 over those three years, since I converted it all, my traditional IRA basis is now $0. Does that mean if I check my traditional IRA account, it should show a $0 balance too?
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Paolo Marino
•Yes, if you converted the full contribution amount each year, your traditional IRA account balance should show $0 or close to it (maybe a few cents of interest if there was any time delay between contribution and conversion). Remember that "basis" refers to the money you've already paid tax on. Since backdoor Roth contributions start as nondeductible traditional IRA contributions (meaning you've already paid tax on that money), you don't pay tax again when converting to Roth as long as you convert quickly before any earnings accumulate and you properly document everything on Form 8606.
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Amina Bah
Just wanted to add that if you're doing backdoor Roth conversions regularly, be careful about the pro-rata rule if you have any other traditional IRA, SEP IRA, or SIMPLE IRA accounts with pre-tax money in them. The IRS looks at all your IRA accounts together when calculating taxes on conversions.
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Oliver Becker
•This is such an important point! I messed this up one year when I had an old 401k that I had rolled into a traditional IRA. Made my backdoor Roth partially taxable because of the pro-rata rule. Definitely something to watch out for.
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