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Backdoor Roth late conversion in Turbotax issue

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  • ajpastor
    replied
    A quick update.  I tried again to reverse engineer TurboTax to get the 8606 that you provided (and I agree with) with no luck.  In TurboTax, the only questions that I believe can cause these issues are regarding  the basis and year end value of the tIRA accounts, which are $5500 and $0, respectively, so I am not sure what else I can do but override and submit by mail.  I am surprised that no one else has had this issue.   Thank you again.

    Leave a comment:


  • DMFA
    replied




    Thank you very much for your reply.  Your proposed 8606 is right on I believe. I have looked at the Finance Buff tutorial and it seems like I did it correctly, but it is not for the late conversion.  I think it may be a TurboTax issue, but it’s hard to say.
    Click to expand...


    You will not report the conversion done *in* 2017 on your 2016 taxes.  This will create a non-deducted basis of $5,500 for 2016 which, since you've converted it anyway, really doesn't mean anything.  It's just an extra thing to document.

    Contributions = *for* a year, even if made late.  For instance, a contribution made in January 2017 *for* tax year 2016 (1/1/16 - 4/17/17) still goes on your 2016 taxes due in April 2017.

    Conversions = *in* a year.  Only conversions made *in* the calendar year 2016 (1/1/16 - 12/31/16) will go on your 2016 taxes due in April 2017, even if you converted contributions you made *for* 2016.

    The conversion you made in April 2017, regardless of the tax year for which the funds were contributed, goes on your 2017 taxes due in April 2018.

    Clear as mud?

    Leave a comment:


  • ajpastor
    replied
    Thank you very much for your reply.  Your proposed 8606 is right on I believe. I have looked at the Finance Buff tutorial and it seems like I did it correctly, but it is not for the late conversion.  I think it may be a TurboTax issue, but it's hard to say.

    Leave a comment:


  • DMFA
    replied
    By saying your basis was $5,500 on line 2, what you're saying is that you had a 2015 contribution that you didn't convert then, meaning you contributed another $5,500 to it for 2016 (line 1).

    Was last April's contribution for 2015 or 2016?  If it was converted, you should have no basis (line 2 = 0).

    Your April 2017 conversion does *not* go on your form 8606 that you're filing for your 2016 taxes.

    Based on what you're saying, if you made a contribution *for* 2015 and converted it *in* April 2016, then your conversion goes on line 8.

    If the contribution you just made (in 2017) was *for* 2016, you report it on lines 1 and 4, meaning it comes out to zero.

    So, I'm assuming the following, and I'll need you to correct me if I'm wrong:

    • $5,500 contribution *for* 2015 in April 2016

    • $5,500 conversion *in* April 2016

    • $5,500 contribution *for* 2016 in April 2017

    • $5,500 conversion *in* April 2017


    This makes form 8606 read as such:

    1. $5,500 (nondeductible 2016 contrib)

    2. $5,500 (2015 and prior years' basis since you made/converted 2015 contrib in 2016)

    3. $11,000 (1+2)

    4. $5,500 (in 2017 *for* 2016)

    5. $5,500 (3-4)

    6. 0 (12/31/16 non-Roth IRA value)

    7. 0 (distributions)

    8. $5,500 (conversions *in* 2016 of your contribution *for* 2015)

    9. $5,500 (6+7+8)

    10. 1.000 (5/9)

    11. $5,500 (8*10, non-taxable portion of conversion)

    12. 0 (7*10, taxable portion of distr)

    13. $5,500 (11+12, non-taxable portion of distr)

    14. $5,500 (3-13, 2016 basis)

    15. 0 (7-12, taxable amount to put on 1040)

    16. $5,500 (=8)

    17. $5,500 (=11)

    18. 0 (16-17, taxable amount of conversion to put on 1040)


    It will be much "cleaner" if you convert the funds you contribute *for* a year *in* that same year, e.g. make your 2017 backdoor contribution in 2017 instead of in early 2018.  Doesn't really make a difference other than filling out more paperwork, though...well, that, and less time for market exposure.

    As for how to enter it into TurboTax, I don't personally use it, but here is a tutorial with pictures from another website.

    Leave a comment:


  • ajpastor
    started a topic Backdoor Roth late conversion in Turbotax issue

    Backdoor Roth late conversion in Turbotax issue

    Hello WCI community.   I have a situation with Turbotax that I cannot figure out.  I contributed 5500 in April of 2016 and converted shortly thereafter.  I did the same this April.  Obviously, this is not ideal timing, but I'll do better next year, I promise.  Anyway, I have read the blog posts and I think I am filling in everything correctly, but my 8606 does not seem right.  Here is my 8606:

    1.   5500
    2.  5500
    3.  11,000
    4.  5500
    5.  5500
    6-12.  0
    13.  5500
    14.  5500
    15.  0
    16.  5500
    17.  5500
    18.  0


    I cannot figure out why line 8 is 0.  I think it should be 5500.  I have messed around with the numbers in the program, but nothing seems to work.  Does this look right to you?  Thank you so much for your help.

    Andy
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