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  • Roth IRA contribution

    I've a fellow income and I will fund my Roth fully this year.

    What if I moonlighted and my income disqualified me from direct Roth contribution... can I withdraw the money back or what will be the situation?

    Thank you

  • #2
    You can withdraw excess contributions in the same year like they were never made. You'd owe taxes on any earnings.

    If you think you'll be over the income limit, just do backdoor Roth to be safe.

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    • #3
      To piggy back on this, if I want to do a backdoor for the 2017 tax year, do I have to make the TIRA deposit and then transfer to RIRA before Dec 31st 2017? Or just before I file taxes

      Comment


      • #4
        A backdoor Roth contribution is two steps:

        1. Traditional IRA non-deductible contribution

        2. Traditional IRA -> Roth IRA conversion


        Step one is treated as for the tax year of contribution. Contributions from 1/1/2017 - 2017 tax filing deadline without extensions (nominally 4/15/2018) are considered 2017 contributions.

        Step two is treated as for the tax year when it actually occurs. Roth conversions from 1/1/2017 - 12/31 are treated as 2017 conversions. Conversions from 1/1/2018 - 4/15/2018 would be treated as a 2018 conversion So it is really your choice which tax year you want the conversion to occur in.

        The key to a backdoor Roth is to have little to no pre-tax balances in IRAs (Traditional, SEP and SIMPLE) by 12/31 of the year you do the Roth conversion.

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        • #5




          I’ve a fellow income and I will fund my Roth fully this year.

          What if I moonlighted and my income disqualified me from direct Roth contribution… can I withdraw the money back or what will be the situation?

          Thank you
          Click to expand...


          You have until 10/15/18 to recharacterize your Roth contribution to a TIRA; then you can do the backdoor conversion. Or, as @DMFA said, you can withdraw and then contribute to a TIRA.
          Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6




            To piggy back on this, if I want to do a backdoor for the 2017 tax year, do I have to make the TIRA deposit and then transfer to RIRA before Dec 31st 2017? Or just before I file taxes
            Click to expand...


            You might find this article helpful:

            Explaining Backdoor Roth IRAs
            Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              Thank you very much

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              • #8
                So basically I just just make my TIRA contribution for 2017 anytime before 4/2018, if I convert it to a ROTH after Jan 2017, then I report it the following year, if I convert it Dec 2017 then I report for this tax year?

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                • #9




                  So basically I just just make my TIRA contribution for 2017 anytime before 4/2018, if I convert it to a ROTH after Jan 2017, then I report it the following year, if I convert it Dec 2017 then I report for this tax year?
                  Click to expand...


                  Yep, contributions are *for* a year, and conversions are *in* a year.  If you do it all *in* 2017, then it will all show up on your 2017 taxes.

                  If you contribute/convert *for* 2017 *in* 2018:

                  • Your form 8606 for 2017 taxes will show the $5500 non-deductible TIRA contribution and a $5500 basis.

                  • Your form 8606 for 2018 will show the $5500 conversion of that 2017 contribution

                  • Assuming you do contribute *for* 2018 *in* 2018 and also convert it *in* 2018, then your form 8606 for 2018 will show $5500 contrib, $5500 basis, $11,000 converted, and ideally nothing taxable


                  Plenty of threads about this. Just another unnecessary complication by the IRS.

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