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Backdoor Roth Tax question.

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  • Backdoor Roth Tax question.

    I set up and contributed $5500 to traditional IRA's last year for me and my wife (11K total) .  I then converted this to Roth IRA's in each of our names 2 weeks later.  Neither of us had any other traditional IRA's so the pro rata rule shouldnt come into effect.     Now when doing my taxes the software says this is taxable event for me and my wife and says since I am over the income limits that the Roth contribution is considered an excess contribution and there will be penalties until the money is removed from the Roth account.   Is this just a glitch within the software, or did I do this process wrong and create a taxable event?

    Im using the turbotax delux web version of the software.   We file a joint return and my wife has no income.

  • #2
    It sounds like an input error to me. The only taxation should be if you had any growth and/or income that you converted. Check what you've done carefully. You did not make a Roth contribution. You converted to a Roth IRA from an IRA with basis (i.e. - nondeductible IRA) Given your fact pattern, this is not a taxable event. Don't forget to file your form 8606.
    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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