Methods to Report 2024 Backdoor Roth In FreeTaxUSA (Up to date)

[Updated on January 30, 2025 with screenshots from FreeTaxUSA for the 2024 tax year.]

TurboTax and H&R Block are the 2 main tax software program for submitting private tax returns. A low-cost different to TurboTax and H&R Block software program is FreeTaxUSA. FreeTaxUSA isn’t solely for easy returns. It might probably nonetheless deal with extra complicated transactions, such because the Backdoor Roth.

Simply as a refresher, a Backdoor Roth entails making a non-deductible contribution to a Conventional IRA adopted by changing from the Conventional IRA to a Roth IRA. Each the contribution and the conversion must be reported within the tax software program. For extra info on Backdoor Roth, please learn Backdoor Roth: A Full How-To.

What To Report

You report on the tax return your contribution to a Conventional IRA *for* that 12 months, and also you report the conversion to Roth *throughout* that 12 months.

For instance, if you end up doing all of your tax return for 12 months 2024, you report the contribution you made *for* 2024, whether or not you really did it in 2024 or between January 1 and April 15, 2025. You additionally report the conversion to Roth *throughout* 2024, whether or not the contribution was made for 2024, 2023, or any earlier years. Due to this fact a contribution made in 2025 for 2024 goes on the tax return for 2024. A conversion carried out throughout 2025 after you made a contribution for 2024 goes on the tax return for 2025.

You do your self an enormous favor and keep away from a variety of confusion by doing all of your contribution for the present 12 months and ending your conversion in the identical 12 months. I name this a “deliberate” Backdoor Roth or a “clear” Backdoor Roth — you’re doing it intentionally. Don’t wait till the next 12 months to contribute for the earlier 12 months.  Contribute for 2025 in 2025 and convert it in 2025. Contribute for 2026 in 2026 and convert it in 2026. This manner every part is clear and neat.

If you’re already off by one 12 months, it will depend on whether or not you’re dealing with the contribution half or the conversion half proper now. In case you contributed to a Conventional IRA for 2024 in 2025 or if you happen to recharacterized a 2024 Roth contribution to Conventional in 2025, please comply with Cut up-12 months Backdoor Roth IRA in FreeTaxUSA, 12 months 1. In case you contributed to a Conventional IRA for 2023 in 2024 or if you happen to recharacterized a 2023 Roth contribution to Conventional in 2024 and transformed in 2024, please comply with Cut up-12 months Backdoor Roth IRA in FreeTaxUSA, 12 months 2.

Right here’s the situation we’ll use for instance:

You contributed $7,000 to a conventional IRA in 2024 for 2024. Your earnings is just too excessive to assert a deduction for the contribution. By the point you transformed it to Roth IRA, additionally in 2024, the worth grew to $7,200. You don’t have any different conventional, SEP, or SIMPLE IRA after you transformed your conventional IRA to Roth. You didn’t roll over any pre-tax cash from a retirement plan to a conventional IRA after you accomplished the conversion.

In case your situation is totally different, you’ll have to make some changes to the screens proven right here.

Earlier than we begin, suppose that is what FreeTaxUSA exhibits:

We’ll examine the outcomes after we enter the Backdoor Roth.

Convert From Conventional IRA to Roth

The tax software program works on earnings objects first. We enter the conversion first despite the fact that the conversion occurred after the contribution.

Whenever you convert from a Conventional IRA to a Roth IRA, you’ll obtain a 1099-R type. Full this part provided that you transformed *throughout* 2024. In case you solely transformed in 2025, you received’t have a 1099-R till subsequent January. Please comply with Cut up-12 months Backdoor Roth IRA in FreeTaxUSA, 12 months 1 now and are available again subsequent 12 months to comply with Cut up-12 months Backdoor Roth IRA in FreeTaxUSA, 12 months 2. In case your conversion throughout 2024 was in opposition to a contribution you made for 2023 or a 2023 contribution you recharacterized in 2024, please comply with Cut up-12 months Backdoor Roth IRA in FreeTaxUSA, 2nd 12 months.

In our instance, by the point you transformed, the cash within the Conventional IRA had grown from $7,000 to $7,200.

Click on on “Add a 1099-R” when it asks you in regards to the 1099-R.

It’s only a common 1099-R.

Enter the 1099-R precisely as you may have it. Take note of the code in Field 7 and the checkboxes. It’s regular to have the identical quantity because the taxable quantity in Field 2a, when Field 2b is checked saying “taxable quantity not decided.”  Take note of the distribution code in Field 7. It’s code 2 if you happen to’re below 59-1/2 and code 7 if you happen to’re over 59-1/2. The IRA/SEP/SIMPLE field can be checked.

Proper after you enter the 1099-R, you will note the refund quantity drop. Right here we went from a $1,540 refund to $264. Don’t panic. It’s regular and non permanent. The refund quantity will come up after we end every part.

We didn’t inherit this IRA.

It asks you about Roth conversion. Reply Sure to conversion and enter the transformed quantity.

You might be carried out with this 1099-R. Repeat when you have one other 1099-R. In case you’re married and each of you probably did a Backdoor Roth, take note of whose 1099-R it’s whenever you enter the second. You’ll have issues if you happen to assign each 1099-R’s to the identical particular person once they belong to every partner.

It asks you in regards to the foundation carried over from earlier years. In case you did a clear “deliberate” backdoor Roth yearly, you’ll be able to reply “No.” Answering “Sure” and coming into all 0’s on the following web page has the identical impact as answering “No.” When you’ve got gone forwards and backwards earlier than you discovered this information, a few of your earlier solutions could also be caught. Answering “Sure” right here gives you an opportunity to overview and proper them. When you’ve got a foundation carryover on line 14 of Kind 8606 out of your earlier 12 months’s tax return, reply Sure right here and enter it on the following web page.

The values must be all 0 if you happen to did a “clear” deliberate backdoor Roth. In case you had a small quantity of earnings posted to your Conventional IRA after the conversion and also you didn’t convert the earnings, enter the account’s worth within the second field out of your year-end assertion.

We didn’t take any catastrophe distribution.

Now proceed with all different earnings objects till you’re carried out with earnings. Your refund meter remains to be decrease than it must be however it would change quickly.

Conventional IRA Contribution

Discover the IRA Contributions part below the “Deductions / Credit” menu.

Reply Sure to the primary query. An extra contribution means contributing greater than you’re allowed to contribute. We didn’t have that.

Enter the quantity you contributed to the Conventional IRA within the first field. Go away the reply to “Did you turn or recharacterize” at No. We transformed. We didn’t recharacterize. We didn’t repay any distribution both.

Your refund quantity goes up once more! It was a refund of $1,540 earlier than we began. It went down loads and now it’s again to $1,496. The $44 distinction is because of paying tax on the $200 earnings earlier than we transformed to Roth.

We didn’t contribute to a SEP, solo 401k, or SIMPLE plan. Reply Sure if you happen to did.

Withdraw means pulling cash out of a Conventional IRA again to your checking account. Changing to Roth is just not a withdrawal. Reply ‘No‘ right here.

All values are zero whenever you did a “clear” deliberate Backdoor Roth. In case you had a small quantity of earnings posted to your Conventional IRA after you transformed and also you didn’t convert the earnings, enter the steadiness of your Conventional IRA out of your year-end assertion within the second field.

It tells us we don’t get a deduction as a result of our earnings was too excessive. We all know. That’s why we did the Backdoor Roth.

Taxable Earnings from Backdoor Roth

After going via all these, let’s verify the way you’re taxed on the Backdoor Roth. Click on on the three dots on the highest proper above the IRA Deduction Abstract after which click on on “Preview Return.”

Search for Line 4 in Kind 1040.

It exhibits $7,200 in IRA distributions in line 4a and solely $200 is taxable in line 4b. If you’re married submitting collectively and each of you probably did a backdoor Roth, the numbers right here will present double.

Tah-Dah! You set cash right into a Roth IRA via the backdoor whenever you aren’t eligible to contribute to it straight. You pay tax on a small quantity of earnings if you happen to waited between contributions and conversion. That’s negligible relative to the advantage of having tax-free progress in your contributions for a few years.

Troubleshooting

In case you adopted the steps and you aren’t getting the anticipated outcomes, right here are some things to test.

Conversion Is Taxed

In case you don’t have a retirement plan at work, you may have a better earnings restrict to take a deduction in your Conventional IRA contribution. FreeTaxUSA gives you the deduction if it sees that you simply qualify. It doesn’t provide the selection of constructing it non-deductible. You see this deduction on Schedule 1, Line 20.

Taking this deduction additionally makes your Roth IRA conversion taxable. The taxable Roth IRA conversion and the deduction in your Conventional IRA contribution offset one another to create a wash. That is regular and it doesn’t trigger any issues whenever you (or your partner) certainly don’t have a retirement plan at work.

In case you even have a retirement plan at work, the software program didn’t see it. Whether or not you may have a retirement plan at work is marked by the “Retirement plan” field in Field 13 of your W-2.

Perhaps you forgot the test it whenever you entered the W-2. Double-check the “Retirement plan” field in Field 13 of your (and your partner’s) W-2 entries in FreeTaxUSA to verify they match the W-2.

Self vs Partner

If you’re married, be sure you don’t have the 1099-R and the IRA contribution blended up between your self and your partner. In case you inadvertently assigned two 1099-Rs to 1 particular person as an alternative of 1 for you and one in your partner, the second 1099-R won’t match up with a Conventional IRA contribution made by a partner. In case you entered a 1099-R for each your self and your partner however you solely entered one Conventional IRA contribution, you may be taxed on one 1099-R.