2023 Backdoor Roth IRA Home Base

[Larry Ragman]

Thanks for your help. I did the contribution and subsequent conversion both in January 2020. If it’s not showing a conversion then I guess I have a problem.

Not a problem, I think, just the way the process works. See jfoxcpacfp just a few entries above. Your 8606 shows you made the tIRA contribution in 2021 for 2020. Fine. Your 8606 for 2021 (filed next year) will show the conversion as a taxable event but no tax owed because you converted $6k of basis to the Roth.

By the way, you can still do a 2021 Backdoor Roth since you assigned this transaction to 2020.

[Tim]

Feeding the beast:
2019 Calendar year
2019 Converted in 2019 $1,803 from a rollover IRA in residency

2020 Calendar year
2020 Contribution for 2019 $6000
2020 Contribution for 2020 $6000
2020 Converted $12,000

8606 for 2019
Page 1 shows the $6000 contribution and conversion on line 8 $1803 for 2019, line 14 the $6000 basis.
Page 2 shows the taxable amount of converted of $1803

I was expecting to have the non deductible 2020 contribution and the basis. I was expecting to see 2020 non deductible $6000k and the 2019 $6000 k offset the $12,000 conversion in 2020. This is more a Fidelity data input problem for Turbo Tax to get the numbers lined up.

https://www.whitecoatinvestor.com/late-contributions-to-the-backdoor-roth-ira/

I can see the numbers on the example to handle this. Anyone know how to get this lined up on the 8606?

[Tim]

Trying to confirm I understand the 8606 form and meanings. Turbo Tax support has reached the point that one of their staff Tax Attorneys on the support staff (third escalation) has all the data and is calling back. Three transactions and want to verify that this is being reports correctly. Fellowship rollover and two years of the BD roth nondeductible contributions. Is the target for basis and taxable for Form 8606 at the bottom correct? 2019 was the first year for the IRA's (rollover,traditional and Roth)
The confusion comes from reporting the nondeductible contribution by tax year and the conversions by calendar year.
A confirmation would be appreciated or simply provide the correct targets for the basis/taxable for each year. The taxes were paid on the rollover in 2019. Any correction will probably just result in correcting the 2019 8606. The goal is to get the contribution and conversion in the same year. Was not feasible for 2019.

Thanks in advance.

Rollover IRA
Run Date Action Amount ($)
12/24/2019 ROLLOVER CASH DIRECT ROLLOVER 1802.94 Pretax
12/26/2019 CONV TO ROTH IRA VS 231-398115-1 (Cash) -1802.94 A
Traditional IRA
07/13/2020 CASH CONTRIBUTION PRIOR YEAR (Cash) 6000.00
07/20/2020 CONV TO ROTH IRA VS 231-398115-1 (Cash) -6000.00 B
12/17/2020 CASH CONTRIBUTION CURRENT YEAR (Cash) 6000.00
12/23/2020 CONV TO ROTH IRA VS 231-398115-1 (Cash) -6000.00 C
Roth IRA
12/26/2019 ROTH CONVERSION VS 225-956311-1 (Cash) 1802.94 A
07/20/2020 ROTH CONVERSION VS 226-631207-1 (Cash) 6000.00 B
12/23/2020 ROTH CONVERSION VS 226-631207-1 (Cash) 6000.00 C

2019 Form 8606
Part 1 Line 14 Basis 7802.94 A+B
Part 2 Line 18 Taxable 1802.94 A
2020 Form 8606
Part 1 Line 14 Basis 13802.94 A+B+C
Part 2 Line 18 Taxable 0

Your tax basis will be your total contributions and conversions, minus what you've withdrawn. If you fully convert a traditional IRA into a Roth IRA, you might think your tax basis is zero dollars because none of your contributions have yet been taxed.

[Peds]

Trying to confirm I understand the 8606 form and meanings. Turbo Tax support has reached the point that one of their staff Tax Attorneys on the support staff (third escalation) has all the data and is calling back. Three transactions and want to verify that this is being reports correctly. Fellowship rollover and two years of the BD roth nondeductible contributions. Is the target for basis and taxable for Form 8606 at the bottom correct? 2019 was the first year for the IRA's (rollover,traditional and Roth)
The confusion comes from reporting the nondeductible contribution by tax year and the conversions by calendar year.
A confirmation would be appreciated or simply provide the correct targets for the basis/taxable for each year. The taxes were paid on the rollover in 2019. Any correction will probably just result in correcting the 2019 8606. The goal is to get the contribution and conversion in the same year. Was not feasible for 2019.

Thanks in advance.

Rollover IRA
Run Date Action Amount ($)
12/24/2019 ROLLOVER CASH DIRECT ROLLOVER 1802.94 Pretax
12/26/2019 CONV TO ROTH IRA VS 231-398115-1 (Cash) -1802.94 A
Traditional IRA
07/13/2020 CASH CONTRIBUTION PRIOR YEAR (Cash) 6000.00
07/20/2020 CONV TO ROTH IRA VS 231-398115-1 (Cash) -6000.00 B
-- took me a second, 2019 rIRA contribution deadline was extended to 7/15/2020.
-- i wonder if TT has that correctly coded?
12/17/2020 CASH CONTRIBUTION CURRENT YEAR (Cash) 6000.00
12/23/2020 CONV TO ROTH IRA VS 231-398115-1 (Cash) -6000.00 C
Roth IRA
12/26/2019 ROTH CONVERSION VS 225-956311-1 (Cash) 1802.94 A
07/20/2020 ROTH CONVERSION VS 226-631207-1 (Cash) 6000.00 B
12/23/2020 ROTH CONVERSION VS 226-631207-1 (Cash) 6000.00 C


2019 Form 8606
Part 1 Line 14 Basis 7802.94 A+B
-- no (i think) basis is what is carried over. that would just be 6K from 2019, carried to 2020.

Part 2 Line 18 Taxable 1802.94 A
-- yes

2020 Form 8606
Part 1 Line 14 Basis 13802.94 A+B+C
-- again, only basis is 6K from 2019. 2020 is not basis for 2020 as it was converted same year.
-- once the 1800 was converted in 2019, it no longer should show up anywhere in 2020 forms.

Part 2 Line 18 Taxable 0

Your tax basis will be your total contributions and conversions, minus what you've withdrawn. If you fully convert a traditional IRA into a Roth IRA, you might think your tax basis is zero dollars because none of your contributions have yet been taxed.

spiritrider perhaps......

[Tim]

spiritrider perhaps......

What is the basis for line 14 2020?

[Peds]

What is the basis for line 14 2020?

0. you converted it all.

[TheDangerZone]

0. you converted it all.

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.

[Peds]

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/

[TheDangerZone]

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.

[Tim]

0. you converted it all.

Thank you Peds.

[Ladybug]

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?

[PharmDJG]

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.

[jfoxcpacfp]

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.

[jfoxcpacfp]

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.

[Tim]

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?