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Backdoor Roth after recharacterizing from the prior year

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  • Backdoor Roth after recharacterizing from the prior year

    Hi everyone,

    I graduated from fellowship this year. I previously thought I would be eligible to fully fund a Roth IRA because I took a few months of vacation between fellowship and starting my attending job. I had even carefully laid out what I thought my AGI would be for 2020, so I gave the full $6000 allowed to my Roth IRA with Vanguard. When I finally received my W-2s, I discovered I made just above the income limit due to a sign-on bonus and a higher than predicted salary. I'm in the process of recharacterizing the Roth to a Traditional IRA. My plan is to then do a backdoor Roth, which I've gathered is allowable. I guess this is a good problem to have.

    Possibly complicating matters: I rolled over my 403b from residency to a traditional IRA, then transferred that into my roth IRA. I'm being taxed on a portion of that and entered in the 1099-R using my tax software which I expected.

    A few questions:

    - Will I get any additional tax forms after this is all complete? Or will all my tax forms from this process be generated in early 2022 (and therefore pay all the taxes for this procedure next tax cycle rather than now).
    - Is these even allowed since I rolled over my 403b to my Roth IRA?
    - Anyone know how document all this in tax software? I've been using freetaxusa.com for years without problems, but maybe I'm too grown up for a free tax program.

    Thanks!
    Last edited by imdmd; 02-08-2021, 04:09 PM. Reason: to make my question more clear when I'm not overwhelmed by all the information

  • #2
    1. Your related tax forms will (should) arrive by 1/31/22. I’m assuming you are recharacterizing in 2021 rather did so in 2020, even though you stated you graduated training “this year”.
    2. No relationship between the two.
    3. No help. But I would ask, as a new attending, what are your true priorities? To save $60 while risking hours of time trying to figure out these issues or to “graduate” to a “grown-up” TT package? If you’re W2 only, no need to pay CPA fees, so I have no qualms with that.
    This should be a lesson to all others who attempt to avoid a simple 2nd step and contribute directly to a Roth IRA when they are not POSITIVE what their AGI will be. So much easier and good practice to start a backdoor Roth asap, since you w/b repeating every following year of your career. What do you have to lose?

    imdmd - love your use of “grown up” (seriously). May steal for future use harassing deserving posters.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      You’re a moderator but your goal is to harass (your words) people who ask questions? Thank you for the help and insight and yes I did mean I graduated last year, but dial it back a little bit. People make mistakes and are on this board because they’re looking for help.

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      • #4
        Originally posted by imdmd View Post
        Hi everyone,

        I graduated from fellowship this year. I previously thought I would be eligible to fully fund a Roth IRA because I took a few months of vacation between fellowship and starting my attending job. I had even carefully laid out what I thought my AGI would be for 2020, so I gave the full $6000 allowed to my Roth IRA with Vanguard. When I finally received my W-2s, I discovered I made just above the income limit due to a sign-on bonus and a higher than predicted salary. I'm in the process of recharacterizing the Roth to a Traditional IRA. My plan is to then do a backdoor Roth, which I've gathered is allowable. I guess this is a good problem to have.

        Possibly complicating matters: I rolled over my 403b from residency to a traditional IRA, then transferred that into my roth IRA. I'm being taxed on a portion of that and entered in the 1099-R using my tax software which I expected.

        A few questions:

        - Will I get any additional tax forms after this is all complete? Or will all my tax forms from this process be generated in early 2022 (and therefore pay all the taxes for this procedure next tax cycle rather than now).
        - Is these even allowed since I rolled over my 403b to my Roth IRA?
        - Anyone know how document all this in tax software? I've been using freetaxusa.com for years without problems, but maybe I'm too grown up for a free tax program.

        Thanks!
        - @jfox means you no ill will, so ill say calm down. your post is one of hundreds of the same thing, but she is not frustrated with you.

        - you will get 1099 for the 403 and a 1099 for the IRA in 2022. you are performing these items for 2021 therefore tax season is next april.
        - the conversion of a 403 to a rIRA has nothing to do with bdrIRA other than income limits. the larger question was should you have even done it depending on marginal brackets vs doing nothing.
        - i use freetaxusa. if you read my post youll see a walkthrough there: https://forum.whitecoatinvestor.com/...-ira-home-base

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