Among the purposes of Form 8606 is reporting a "backdoor Roth IRA" conversion, the non-IRS term for converting funds from a traditional IRA or 401(k) plan into a Roth IRA. The money rolled into the IRA is taxable to the extent it hasn't already been taxed, including the earnings on the money until it is converted to a Roth IRA. The taxpayer should have received a Form 1099-R for the distribution that was converted to a Roth IRA.
To report a backdoor Roth IRA conversion, from the Main Menu of the tax return (Form 1040) select:
- Nondeductible IRAs - If filing MFJ, select Taxpayer or Spouse.
- Traditional IRAs
- Net Amount of Traditional IRAs Converted to Roth IRAs - Enter the amount converted.
The taxable amount will carry to Form 1040 line 4b as a Taxable IRA distribution.
Note: This is a guide on entering a backdoor Roth IRA into the TaxSlayer Pro program. This is not intended as tax advice.