IRA rollovers, conversions and nondeductible IRA contributions

Find out how to enter your IRA rollovers, conversions and nondeductible IRA contributions, such as a "backdoor Roth" contribution, for your federal return on Credit Karma Tax.

Roth Rollovers or Conversions

1. Enter your 1099-R for the Roth IRA rollover, with the box 2a amount corrected.
   
   • The issuer of your 1099-R is instructed to put the taxable amount in box 2a. However, if they do not know that you rolled over any of it, they won't know to exclude that amount from box 2a. In this case, you can either ask the issuer for a revised 1099-R (tell them that you rolled over $X amount), or you can do the calculation yourself. Credit Karma Tax requires you to do this calculation yourself.
2. In the field Amount of distribution rolled over or converted to Qualified Roth IRA enter the amount you rolled over to a Roth IRA.
   
   • If you have “backdoor Roth” contributions, follow the steps below.

Backdoor Roth Contributions

A "backdoor Roth" is a way for taxpayers to contribute to a Roth IRA even though their AGI would normally limit their contributions. This typically involves rolling over funds from a tax deferred account, such as a traditional IRA, into a Roth account. You should seek advice from a qualified financial advisor to see if this approach makes sense for your situation.

To enter your "backdoor Roth" contributions in Credit Karma Tax:

1. Enter your 1099-R for the Roth IRA rollover, with the box 2a amount corrected.
   • The issuer of your 1099-R is instructed to put the taxable amount in box 2a. However, if they do not know that you rolled over any of it, they won't know to exclude that amount from box 2a. In this case, you can either ask the issuer for a revised 1099-R (tell them that you rolled over $X amount), or you can do the calculation yourself. Credit Karma Tax requires you to do this calculation yourself.
2. In the field Amount of distribution rolled over or converted to Qualified Roth IRA enter the amount you rolled over to a Roth IRA. Press the tab key or click outside this box after you enter a value here to bring up a new field for backdoor Roth entry.
3. Enter your backdoor Roth amount.
4. Hit next, and you'll be taken to the Form 8606 questions from there, and Form 8606 will generate as needed.

Nondeductible IRA contributions

Nondeductible IRA contributions are contributions made to your traditional IRA that weren’t deducted on your federal tax return. Because these contributions are made with money that has already been taxed, you don’t have to pay taxes on that income when you withdraw it; however, you do have to pay taxes on the earnings. You might make nondeductible IRA contributions if you already have a retirement plan through your employer and contribute to a separate IRA.

If you made nondeductible IRA contributions, you will need to report them on Form 8606 in your return. For specifics on when you must file Form 8606, please review the IRS Instructions for Form 8606. Credit Karma Tax will generate Form 8606 and include it in your federal return, if necessary, based on the information you provide in Traditional & Roth IRA Contributions and on your 1099-R entry. Credit Karma Tax won't generate a Form 8606 if there were no taxable distributions for the year or for tracking purposes only.

Go to this section in Credit Karma Tax: Traditional & Roth IRA Contributions

For tax purposes, you must also keep up with the basis, of your nondeductible contributions to avoid calculating taxes incorrectly as most IRA custodians may not have this information handy. Your basis is the total of all your nondeductible contributions and nontaxable amounts included in rollovers made to these IRAs minus the total of all your nontaxable distributions. You should keep records so that the taxable portion of your retirement income is calculated correctly when you begin receiving distributions.

If you didn't have a taxable event that would require you to file Form 8606 for the current tax year, but you made nondeductible contributions in prior years, it’s a good idea to keep copies of Form 8606 you filed in prior years. For example, if you made nondeductible contributions last year hold onto your prior year Form 8606. This can help you track your basis until you need to file Form 8606 on a subsequent tax return. Credit Karma Tax will generate Form 8606 if it’s necessary to include in your federal return based on the information you provide.

If you entered pre-tax contribution amounts from your W-2, you don’t need to report them under Traditional & Roth IRA Contributions.