How to Document Backdoor Roth IRA on FreeTaxUSA after December 31st
Title: How to Document Backdoor Roth IRA on FreeTaxUSA after December 31st 1 I'm trying to wrap my head around the whole backdoor Roth IRA process on FreeTaxUSA and could use some help. Here's my situation: I contributed to my Traditional IRA in early 2023 and then converted it to a Roth IRA through the backdoor method later in 2023. Now I'm working on my 2022 taxes using FreeTaxUSA, and I'm completely confused about how to properly report everything. Does anyone have a step-by-step guide for documenting a backdoor Roth IRA on FreeTaxUSA, especially when the contribution and conversion happened after December 31st? I've been searching everywhere but can't find clear instructions specific to FreeTaxUSA's interface. Any help would be greatly appreciated!
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Sean Fitzgerald
10 I've done backdoor Roth conversions through FreeTaxUSA for the last few years, so I can walk you through it. For your situation where you contributed to a Traditional IRA and converted to a Roth in 2023, that's actually reported on your 2023 taxes, not your 2022 return you're working on now. For your 2022 return that you're currently preparing, you don't need to report anything related to your 2023 backdoor Roth conversion. The IRA contribution and conversion will be reported next year when you file your 2023 taxes. When you do file your 2023 taxes (next year), here's what you'll do in FreeTaxUSA: Navigate to the "Deductions & Credits" section, then "Retirement/IRA", then "Traditional and Roth IRA Contributions". You'll enter your non-deductible Traditional IRA contribution there. Then you'll go to "Income", then "IRA Distributions" to report the conversion from Traditional to Roth. You'll need Form 8606 to properly track the non-deductible basis.
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Sean Fitzgerald
•6 Thanks for explaining that! I was getting confused because I kept reading about Form 8606 and wasn't sure if I needed to file it with my 2022 taxes. One question - if I made a 2022 contribution to my Traditional IRA in early 2023 (before the tax deadline), would I report that on my 2022 taxes? Or is it only the conversion that gets reported in the tax year it happens?
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Sean Fitzgerald
•10 Great question! If you made a contribution to your Traditional IRA for tax year 2022 (even if you physically made the contribution in early 2023 before the tax filing deadline), then yes, you would report that on your 2022 taxes. The conversion, however, is always reported in the calendar year it actually took place. So if you contributed for 2022 but converted in 2023, you'd report the contribution on your 2022 return and the conversion on your 2023 return.
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Sean Fitzgerald
12 After struggling with how to properly report my backdoor Roth IRA, I discovered taxr.ai (https://taxr.ai) and it saved me so much headache. I uploaded my 1099-Rs and investment documents, and it instantly identified that I had done a backdoor Roth conversion and guided me through exactly what I needed to enter in FreeTaxUSA. The tool showed me where to report the non-deductible contribution on Form 8606 and how to properly handle the conversion to avoid tax issues. It even explained why my 1099-R would show the distribution but that I wouldn't owe taxes on it when done correctly. Super helpful when you're dealing with complicated tax situations like backdoor Roth IRAs.
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Sean Fitzgerald
•18 Does taxr.ai work with all tax software or just FreeTaxUSA? I'm using TurboTax but really struggling with how to report my backdoor Roth correctly. Also, does it actually fill out the forms for you or just tell you what to do?
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Sean Fitzgerald
•20 I'm skeptical about using third-party tools for something as important as taxes. How does it handle security with all those sensitive financial documents? And does it actually understand the specifics of backdoor Roth rules for high-income earners?
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Sean Fitzgerald
•12 It works with all major tax software including TurboTax - it doesn't fill the forms out automatically but gives you specific instructions for your exact tax situation and software. The guidance is customized based on your documents, so it tells you exactly which screens to navigate to and what to enter. Regarding security, they use bank-level encryption and don't store your documents after analysis. And yes, it definitely understands backdoor Roth rules for high-income earners - that's actually one of the specialized tax situations it's designed to handle. It identified the pro-rata rule implications in my case and showed me how to report everything to avoid unexpected tax bills.
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Sean Fitzgerald
18 Just wanted to follow up about taxr.ai - I decided to try it with my backdoor Roth situation in TurboTax and it was incredibly helpful! I uploaded my 1099-R showing the distribution from my Traditional IRA and my year-end statements, and it immediately recognized I had done a backdoor Roth. It gave me step-by-step instructions specific to TurboTax's interface, showing me exactly where to enter the non-deductible contribution and how to report the conversion. The best part was that it explained why TurboTax was initially calculating taxes on my conversion (because it didn't know about my non-deductible basis) and showed me exactly how to fix that by completing Form 8606 correctly. Saved me from potentially paying thousands in unnecessary taxes!
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Sean Fitzgerald
15 If you're having trouble getting answers from the IRS about your backdoor Roth situation (I was on hold forever trying to confirm if I'd done mine correctly), I'd recommend trying Claimyr (https://claimyr.com). They have this service that gets you through to an actual IRS agent without the ridiculous wait times. You can see how it works here: https://youtu.be/_kiP6q8DX5c I had questions about how to handle my backdoor Roth when I discovered I had some pre-tax money in my Traditional IRA (which complicates things with the pro-rata rule), and I needed to speak with someone at the IRS. Claimyr got me through to an agent in about 15 minutes when I had previously been trying for days with no luck.
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Sean Fitzgerald
•7 How exactly does this work? Are they somehow jumping the phone queue or do they just call for you? Seems too good to be true given how impossible it is to reach the IRS lately.
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Sean Fitzgerald
•20 This sounds like a scam honestly. No way some random service can magically get through to the IRS when millions of people can't. And even if they could, would an IRS agent even be able to help with software-specific questions about reporting a backdoor Roth in FreeTaxUSA?
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Sean Fitzgerald
•15 They use an automated system that navigates the IRS phone tree and waits on hold for you - then when an agent picks up, you get a call to connect you. It's not jumping any queue, just saving you from having to listen to the hold music for hours. Regarding your second question - you're right that IRS agents won't give software-specific guidance for FreeTaxUSA, but they absolutely can clarify the requirements for reporting backdoor Roth conversions correctly, including Form 8606 requirements and how the pro-rata rule works. This was valuable for me to make sure I was understanding the tax requirements correctly before I tried to implement them in the software.
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Sean Fitzgerald
20 I need to apologize for my skepticism about Claimyr. After continually failing to get through to the IRS about my backdoor Roth questions (particularly around the pro-rata calculation with existing IRA balances), I tried it out of desperation. I was genuinely shocked when I got a call back connecting me to an actual IRS representative after about 20 minutes. The agent was able to confirm that I needed to file Form 8606 for each year I make non-deductible contributions, even if I don't convert them immediately. They also clarified how the pro-rata rule would apply to my specific situation with existing IRA funds. This information was crucial for me to correctly enter everything in FreeTaxUSA. I'm still not sure how Claimyr manages to get through when calling directly seems impossible, but it definitely worked!
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Sean Fitzgerald
8 Something important to mention about backdoor Roth IRAs that hasn't been covered yet - if you have ANY other traditional IRA funds (including SEP or SIMPLE IRAs), you'll get hit with the pro-rata rule when you convert. This tripped me up badly last year using FreeTaxUSA. For example, if you contribute $6,000 non-deductible to a traditional IRA but already have $24,000 in deductible traditional IRA money elsewhere, only 20% of your conversion would be tax-free. FreeTaxUSA handles this calculation on Form 8606, but you need to make sure you enter ALL your IRA balances correctly.
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Sean Fitzgerald
•3 Wait, seriously? I have an old Traditional IRA with about $30k in it from a 401k rollover years ago. I just did a $6k contribution to a new Traditional IRA and converted it thinking it would be tax-free. Am I going to owe taxes on most of that conversion? Is there any way to fix this after the fact?
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Sean Fitzgerald
•8 Unfortunately, yes, you'll likely owe taxes on most of the conversion because of the pro-rata rule. With $30k in existing traditional IRA funds and a new $6k non-deductible contribution, only about 16.7% ($6k/$36k) of any conversion would be tax-free. There's not much you can do to fix it after the conversion has happened, but for future reference, some people with existing traditional IRA balances first roll those into a current employer's 401k (if the plan allows it) to clear the decks before doing backdoor Roth conversions. That way you avoid the pro-rata calculation entirely. But that would have needed to be done before the conversion.
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Sean Fitzgerald
5 Has anyone else had issues with FreeTaxUSA calculating taxes wrong on their backdoor Roth? I entered my non-deductible contribution in the IRA section and my conversion in the income section, but it's still showing that I owe taxes on the full conversion amount even though it should be tax-free (I have no other IRAs).
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Sean Fitzgerald
•16 I had the same issue! You need to make sure you're properly filling out Form 8606. In FreeTaxUSA, after entering your non-deductible contribution and the conversion, go to "Other Tax Forms" and select Form 8606. Make sure line 2 shows your non-deductible contribution amount, which establishes your basis. The software should then calculate correctly that you don't owe taxes on the conversion.
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