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My wife, 55, had only a Roth IRA. Our income does not allow more contributions to her Roth.

She opened a Traditional IRA, deposited $6500 and moved it the next day into her Roth. I read this was legal and called a "back door" Roth contribution.

H&R Block tax program now says we owe a $360 penalty for excess contribution. Is this a program error or did I misunderstand what I could legally do? So far, no reply from HR Block.

Thanks,
Jerry
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My wife, 55, had only a Roth IRA. Our income does not allow more contributions to her Roth.

She opened a Traditional IRA, deposited $6500 and moved it the next day into her Roth. I read this was legal and called a "back door" Roth contribution.

H&R Block tax program now says we owe a $360 penalty for excess contribution. Is this a program error or did I misunderstand what I could legally do? So far, no reply from HR Block.

Thanks,
Jerry

======================
It's quite legal, but you have to make sure it's entered as a Roth conversion transaction, and not a regular contribution to the Roth.

Bill
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My wife, 55, had only a Roth IRA. Our income does not allow more contributions to her Roth.

She opened a Traditional IRA, deposited $6500 and moved it the next day into her Roth. I read this was legal and called a "back door" Roth contribution.

H&R Block tax program now says we owe a $360 penalty for excess contribution.


It's no doubt GIGO, but there's not enough info to figure out exactly where you went awry. So, some questions:

1. What specific date(s) did these transactions occur?
2. Are you using interview or forms entry method?
3. What information document(s), e.g., 1099, did you receive?
4. Does the program know her age?
5. When you look at the return, is there a Form 8606? If so, what numbers appear on what lines?
6 What numbers are on lines 15a and 15b of the 1040?
7. What amount is on line 32 of the 1040?
8. What numbers are on what lines of Form 5329?

Phil
Rule Your Retirement Home Fool
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Thanks for the very prompt reply. I did enter it as a conversion in HR Block. I suspect this is a programming error on their part. I'm still waiting for their reply. I may have to switch to TurboTax. My finances are far too simple to hire an accountant.

Thanks again,
Jerry
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I suspect this is a programming error on their part.

It is almost certainly NOT a programming error. This is an extremely common transaction that has been available and virtually unchanged for almost a decade.

There's just some problem with the way you've entered the data. My guess is that you entered the Roth conversion as a Roth contribution.

Phil asked some good questions to help figure out where the error is.

--Peter
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It is almost certainly NOT a programming error.
I'd agree.

This is the kind of thing that is very unlikely to be done wrong.

If answering Phil's questions don't lead you to the answer, I'd look at the forms directly (rather than interview mode) and work backward from where it shows that calculated penalty. Probably you'll work it back a few lines and see "Oh crap, that box has the wrong value"
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any time you take a taxed account and convert it to a non taxed you still have to pay the tax. I think that is why you have to pay.
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