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  • jfoxcpacfp
    replied
    Yes, you will need to do BD Roth IRA; this is pretty common. The contribution is phased out for the first $10k MAGI (not earned income limit), which applies to almost nobody, anyway.

    Welcome to the forum!

    Leave a comment:


  • Jtkata8
    replied
    I can't seem to find this answer by Google search or in any bdrRoth posts. If I file MFS for 2021, can my spouse and I both still complete a bdrRoth? We would both be over the $10k earned income limit to contribute directly to rIRA accounts. Thanks!

    Leave a comment:


  • jfoxcpacfp
    replied
    Originally posted by rgoldbe1 View Post
    Hi,
    Appreciate any help.

    In 2020, I filed my taxes and then subsequently made my first traditional IRA contribution of 6k (for 2019) and 6k (for 2020). I lump converted afterwards to a Roth IRA.

    For my current taxes, do I put that my IRA contribution was 12k or do I have to amend my 2019 taxes for the first 6k eventhough I have no forms that show a 2019 contribution? My 1099-R has $12,000.00 on it, but not sure if that would seem like an illegal contribution.

    Thank you,
    Randy
    The IRS allows taxpayers to file Form 8606 retrospectively for any past year it was omitted w/o amending income tax returns if there was no tax impact.
    • 2019: file form 8606 to show your $6k TIRA contribution
    • For 2020 form 8606:
      • 2020 TIRA contribution of $6k
      • Conversion = the amount converted for 2019 and 2020
        • any growth w/b taxable.
    Welcome to the forum!

    Leave a comment:


  • Peds
    replied
    Originally posted by rgoldbe1 View Post
    Hi,
    Appreciate any help.

    In 2020, I filed my taxes and then subsequently made my first traditional IRA contribution of 6k (for 2019) and 6k (for 2020). I lump converted afterwards to a Roth IRA.

    For my current taxes, do I put that my IRA contribution was 12k or do I have to amend my 2019 taxes for the first 6k eventhough I have no forms that show a 2019 contribution? My 1099-R has $12,000.00 on it, but not sure if that would seem like an illegal contribution.

    Thank you,
    Randy
    in 2020 you were supposed to file form 8606 for 2019.
    for 2020 you will have 6K of contributions, 12K of conversions with 6K of basis.

    read the articles and come back with questions.

    Leave a comment:


  • rgoldbe1
    replied
    Hi,
    Appreciate any help.

    In 2020, I filed my taxes and then subsequently made my first traditional IRA contribution of 6k (for 2019) and 6k (for 2020). I lump converted afterwards to a Roth IRA.

    For my current taxes, do I put that my IRA contribution was 12k or do I have to amend my 2019 taxes for the first 6k eventhough I have no forms that show a 2019 contribution? My 1099-R has $12,000.00 on it, but not sure if that would seem like an illegal contribution.

    Thank you,
    Randy

    Leave a comment:


  • Peds
    replied
    Originally posted by PharmDJG View Post
    Hello, I'm new to the WCI universe. I have a question involving the pro rata rule for Roth conversions and governmental 457b plans. I recently discovered that my employer's 457b plan accepts rollovers. I then performed a direct rollover of my rollover traditional IRA held at Vanguard to the 457b plan (about $170k). I thought that by doing this the 457b would shield me from having to be subjected to the tax implications of the pro rata rule when I report my 2021 backdoor Roth conversion in next year's tax filing. However, the money from the direct rollover to the 457b is now listed as a separate line item labeled "IRA rollover" within my 457b plan account. I found the IRS rollover chart after the fact and it states that traditional IRA to 457b rollovers are allowed but there is a footnote saying the rollover money must be held in a separate account from the payroll contributions. Was my initial logic correct in thinking that the 457b will shield me from being subjected to the pro rata rule? Or was I wrong? Will I have to include the money rolled over to the 457b plan on IRS form 8606? I haven't performed the Roth conversion yet because i'm not sure what to do. Thanks to anyone that can offer any help.
    so retirement plans will sometimes hold money in different pots for you to see which is rolled over vs contributed vs etc. but this is for record keeping purposes. its all 1 pot in the end.
    its now in a 457, therefore its not an IRA, therefore no prorata issue.

    Leave a comment:


  • Peds
    replied
    Originally posted by Ladybug View Post
    My husband and I are looking to do our first Backdoor Roths for 2020 & 2021. My question is this- I have a $160k Traditional IRA in premarital assets I was advised not to co-mingle with marital assets, or it wouldn’t be protected in the unlikely event of a divorce. We have the extra cash to pay taxes on the conversion to make way for us to do Backdoors, but then I will have co-mingled assets. Any suggestions?
    no clue on the legal aspects but i suspect if you use joint money to pay the tax on the conversion its no longer just yours.
    the larger question is what is the marginal rate you are converting at?
    can you move to an employer plan? do you have a plan to do nondeductible contributions and convert at a lower rate?

    Leave a comment:


  • Tim
    replied
    Originally posted by jfoxcpacfp View Post

    I don’t typically go through lines on the 8606 to answer questions as I depend on our software and then check the output, but I can assure you that you will avoid the pro-rata rule as a result of the conversion.
    This is exactly the task. Understanding the concept and the expected results.
    • Current year conversion of a pretax balance will generate tax
    • Nondeductible contribution generates no additional tax
    • Line 14, Basis carry forward. (this was my conceptual mistake)
    Johanna understands the concept and expected results. It those numbers aren't right, time to dig in. I learned (I think) Line 14 this year.
    Currently, lines 8,9,10,11,and 12 are blank in TurboTax. but 13 is correct.

    Question for Johanna, do I need to fix that with a call to TurboTax?

    Leave a comment:


  • jfoxcpacfp
    replied
    Originally posted by PharmDJG View Post
    Hello, I'm new to the WCI universe. I have a question involving the pro rata rule for Roth conversions and governmental 457b plans. I recently discovered that my employer's 457b plan accepts rollovers. I then performed a direct rollover of my rollover traditional IRA held at Vanguard to the 457b plan (about $170k). I thought that by doing this the 457b would shield me from having to be subjected to the tax implications of the pro rata rule when I report my 2021 backdoor Roth conversion in next year's tax filing. However, the money from the direct rollover to the 457b is now listed as a separate line item labeled "IRA rollover" within my 457b plan account. I found the IRS rollover chart after the fact and it states that traditional IRA to 457b rollovers are allowed but there is a footnote saying the rollover money must be held in a separate account from the payroll contributions. Was my initial logic correct in thinking that the 457b will shield me from being subjected to the pro rata rule? Or was I wrong? Will I have to include the money rolled over to the 457b plan on IRS form 8606? I haven't performed the Roth conversion yet because i'm not sure what to do. Thanks to anyone that can offer any help.
    I don’t typically go through lines on the 8606 to answer questions as I depend on our software and then check the output, but I can assure you that you will avoid the pro-rata rule as a result of the conversion.

    Leave a comment:


  • jfoxcpacfp
    replied
    Originally posted by Ladybug View Post
    My husband and I are looking to do our first Backdoor Roths for 2020 & 2021. My question is this- I have a $160k Traditional IRA in premarital assets I was advised not to co-mingle with marital assets, or it wouldn’t be protected in the unlikely event of a divorce. We have the extra cash to pay taxes on the conversion to make way for us to do Backdoors, but then I will have co-mingled assets. Any suggestions?
    The TIRA will remain in your name. I suppose it wouldn’t hurt to pay the tax from your own funds. Ask your attorney, though, as this is my personal opinion.

    Leave a comment:


  • PharmDJG
    replied
    Hello, I'm new to the WCI universe. I have a question involving the pro rata rule for Roth conversions and governmental 457b plans. I recently discovered that my employer's 457b plan accepts rollovers. I then performed a direct rollover of my rollover traditional IRA held at Vanguard to the 457b plan (about $170k). I thought that by doing this the 457b would shield me from having to be subjected to the tax implications of the pro rata rule when I report my 2021 backdoor Roth conversion in next year's tax filing. However, the money from the direct rollover to the 457b is now listed as a separate line item labeled "IRA rollover" within my 457b plan account. I found the IRS rollover chart after the fact and it states that traditional IRA to 457b rollovers are allowed but there is a footnote saying the rollover money must be held in a separate account from the payroll contributions. Was my initial logic correct in thinking that the 457b will shield me from being subjected to the pro rata rule? Or was I wrong? Will I have to include the money rolled over to the 457b plan on IRS form 8606? I haven't performed the Roth conversion yet because i'm not sure what to do. Thanks to anyone that can offer any help.

    Leave a comment:


  • Ladybug
    replied
    My husband and I are looking to do our first Backdoor Roths for 2020 & 2021. My question is this- I have a $160k Traditional IRA in premarital assets I was advised not to co-mingle with marital assets, or it wouldn’t be protected in the unlikely event of a divorce. We have the extra cash to pay taxes on the conversion to make way for us to do Backdoors, but then I will have co-mingled assets. Any suggestions?

    Leave a comment:


  • Tim
    replied
    Originally posted by Peds View Post

    0. you converted it all.
    Thank you Peds.

    Leave a comment:


  • TheDangerZone
    replied
    Originally posted by Peds View Post

    assuming you contribute and convert in the same year then yes line 14 is 0.
    you can even see that in WCI tutorial here: https://www.whitecoatinvestor.com/ba...-ira-tutorial/
    Yeah, I should have double checked before filing. I followed the TT instructions from The Finance Buff (which was linked in the WCI tutorial) and thought I would be good to go.

    Leave a comment:


  • Peds
    replied
    Originally posted by TheDangerZone View Post

    My 8606 TT return has 6k in line 14. I contributed 6k and subsequently converted 6k in January 2020. So my basis is incorrect. I wonder if I need to file an amendment. Ugh.
    assuming you contribute and convert in the same year then yes line 14 is 0.
    you can even see that in WCI tutorial here: https://www.whitecoatinvestor.com/ba...-ira-tutorial/

    Leave a comment:

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