Backdoor IRA: Is it a Conversion or a Rollover?

Home Fairmark Forum Retirement Savings and Benefits Backdoor IRA: Is it a Conversion or a Rollover?

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    Sasha
    Participant

    Hi,

    Since our MFJ income is over the limit for the direct Roth IRA contribution, we went the Backdoor Roth IRA route for 2021. No other IRA’s, so we shouldn’t be taxed on the contribution to the non-deductible IRA that was converted to the Roth IRA soon after. However…

    Now I’m getting confused on the FreeTaxUSA website.

    – If I choose a Yes to the question “<span style=”color: #212f45; font-family: ‘Helvetica Neue’, Arial, sans-serif;”>Did you convert part or all of this distribution from a traditional IRA to a Roth IRA?” and say that we converted $6k each I already see that my Federal refund of $10 jumps to the amount we owe. Will it potentially go down later in the process or am I supposed to say No to the above question?</span>

    – If I say No to Conversion, the next question asks “<span style=”color: #212f45; font-family: ‘Helvetica Neue’, Arial, sans-serif;”>Did you rollover part or all of this distribution into a traditional IRA or another qualified retirement account within 60 days of receiving this distribution?”. If I say Yes to this question, then the amount reverts to $10 Federal Refund.</span>

    My understanding is that it should be a conversion and the program should prepare Forms 8606 for us and not calculate any tax, but something isn’t working in my case.

    Should I choose a Rollover so I’m not taxed and then fill out Form 8606 separately and mail it to the IRS. Would this workaround be acceptable or should I buy TT package instead.

    Thanks

     

     

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