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Darn, I messed this up didn't I? (Backdoor Roth)

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  • Darn, I messed this up didn't I? (Backdoor Roth)

    --Spouse residency retirement funds (~$20k) were rolled over into his (new, empty) IRA on Jan 2 2020
    --We did a Roth conversion for all of those funds in November of this year, bringing the account to $0
    --Then we contributed $5999 to that same IRA and did another Roth conversion in December

    Now that I'm looking at the 1099-R he was sent, all these transactions are lumped together in one $26k sum. Because the IRA wasn't $0 at the beginning of the year, does that mean the money meant for the backdoor Roth has to be taxed? I think I thought the account just had to be $0 at the time of the conversion, not at the beginning of the tax year.

    Am I understanding my mistake correctly and is there any way to fix it?

  • #2
    - ok, really? 5999? stop that....
    - the 1099 reports the total conversion, aka 26K. should also have a 1099 from the retirement plan.
    - your 8606 tells the IRS that hey, 6K was nondeductible.
    - therefore once your taxes are complete you should see that 20K was added as taxable, and 6K wasnt.
    - tIRA balances need to be $0 by 12/31 of yr of conversion, not time.

    so i only see a $1 mistake.

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    • #3
      So it doesn’t matter that the account balance wasn’t $0 at the beginning of the year?

      The retirement plan transaction is more complicated. It went from retirement plan—>Schwab (automatic rollover we had no choice in) during 2019 and then the rollover to TD Ameritrade (where out main accounts are) happened early Jan 2020. (Because I procrastinated. I shouldn’t do that) So no 1099 from the retirement plan for 2020, just 2019. That shouldn’t matter though, right?

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      • #4
        Originally posted by MSooner View Post
        So it doesn’t matter that the account balance wasn’t $0 at the beginning of the year?

        The retirement plan transaction is more complicated. It went from retirement plan—>Schwab (automatic rollover we had no choice in) during 2019 and then the rollover to TD Ameritrade (where out main accounts are) happened early Jan 2020. (Because I procrastinated. I shouldn’t do that) So no 1099 from the retirement plan for 2020, just 2019. That shouldn’t matter though, right?
        no unless you did a bdrIRA in 2019.

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        • #5
          Think of it this way, the conversion is your taxable event, not the contribution.

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