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Appropriately filling out 8606 for re-characterized Roth --> Traditional IRA

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  • Appropriately filling out 8606 for re-characterized Roth --> Traditional IRA

    Long story short: I only recently picked up the WCI books and have started on the journey of financial literacy. For better or for worse, I was contributing to Roths and Traditional IRAs over the last few years with a primitive understanding of IRS paperwork obligations. Now, with more knowledge, I'm going back and cleaning up the paperwork mess. I've essentially made all of the Backdoor Roth IRA mistakes that Dr. D. outlines in a spectacularly complex combination of different elements, year to year. For now...let's deal with 2017.

    My question is about how to appropriately document a re-recharacterized (Roth --> traditional) IRA contribution in the context of a Backdoor Roth contribution.

    1. Towards the end of 2016, I made a $5,500 contribution to a Roth IRA.
    2. We made more $$ in 2016 than expected, thus making the Roth contribution in 2016 out-of-bounds. To alleviate this, in early 2017, that contribution was re-characterized to a Traditional IRA. In the interim, a small amount of gains ~$600 had accrued. This was in fact the first amount of money put into the Traditional IRA. It was previously $0.
    3. Also in 2017, I contributed another $5,500 (for 2017) to the Traditional. I then rolled over (backdoor) the recharacterized contribution from 2016 plus the new contribution in 2017 into the Roth, for a total of $11,600 rolled over.
    4. I am now filling out the 8606 for 2017 and would appreciate somebody checking my work. Yes, I should have done this correctly the first time.

    Question:

    1. Even though I did the recharacterization of the out-of-bounds 2016 Roth contribution in 2017, am I right to assume that my basis on the Traditional IRA in 2017 (Line 2 of of the 2017 8606) should be the $5,500 that I contributed to the Roth in 2016 (but was then re-characterized to Traditional)?

    2. Do I owe the IRS an updated 8606 for 2016 showing a traditional IRA contribution of $5,500, since technically that original $5,500 that I put in the Roth was later re-recharacterized to the Traditional?

    I hope this is clear! Thanks all,

    C


  • #2
    Originally posted by clmcatee View Post
    Long story short: I only recently picked up the WCI books and have started on the journey of financial literacy. For better or for worse, I was contributing to Roths and Traditional IRAs over the last few years with a primitive understanding of IRS paperwork obligations. Now, with more knowledge, I'm going back and cleaning up the paperwork mess. I've essentially made all of the Backdoor Roth IRA mistakes that Dr. D. outlines in a spectacularly complex combination of different elements, year to year. For now...let's deal with 2017.

    My question is about how to appropriately document a re-recharacterized (Roth --> traditional) IRA contribution in the context of a Backdoor Roth contribution.

    1. Towards the end of 2016, I made a $5,500 contribution to a Roth IRA.
    2. We made more $$ in 2016 than expected, thus making the Roth contribution in 2016 out-of-bounds. To alleviate this, in early 2017, that contribution was re-characterized to a Traditional IRA. In the interim, a small amount of gains ~$600 had accrued. This was in fact the first amount of money put into the Traditional IRA. It was previously $0.
    3. Also in 2017, I contributed another $5,500 (for 2017) to the Traditional. I then rolled over (backdoor) the recharacterized contribution from 2016 plus the new contribution in 2017 into the Roth, for a total of $11,600 rolled over.
    4. I am now filling out the 8606 for 2017 and would appreciate somebody checking my work. Yes, I should have done this correctly the first time.

    Question:

    1. Even though I did the recharacterization of the out-of-bounds 2016 Roth contribution in 2017, am I right to assume that my basis on the Traditional IRA in 2017 (Line 2 of of the 2017 8606) should be the $5,500 that I contributed to the Roth in 2016 (but was then re-characterized to Traditional)?

    2. Do I owe the IRS an updated 8606 for 2016 showing a traditional IRA contribution of $5,500, since technically that original $5,500 that I put in the Roth was later re-recharacterized to the Traditional?

    I hope this is clear! Thanks all,

    C
    I am in the exacty same situation as you, as well as for the exact year (contribute to roth in 2016, over income limit, recharacterize in 2017, and never did the 8606). now i'm struggling...

    Comment


    • #3
      I'm just going to call the IRS and ask. Will let you know what they say!

      Comment


      • #4
        Originally posted by clmcatee View Post
        I'm just going to call the IRS and ask. Will let you know what they say!
        good luck.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

        Comment

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