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Super Tough , challenging Backdoor IRA plus return of excess IRA contribution issue

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  • Super Tough , challenging Backdoor IRA plus return of excess IRA contribution issue

    Hi All,

    Through my stupid error, I have got myself into a return of excess IRA contribution issue on top of the backdoor IRA conversion.

    Accidentally made 5500 $ excess contribution to my wife's Traditional IRA in 2018

    Realized this problem in 2021 and removed the excess contribution in 2021. ( also paid penalty of each year 2018, 2019,2020 for not removing excess contribution on forms 5329)

    Also, I did the backdoor IRA conversion of wifes basis of 29,000$ (including 2021 contribution) for the first time.

    Value of her TIRA on dec 31st 2021 was zero.

    for 2021 tax return-- I am going to file both forms 8606 and form 5329.

    On form 8606-- on Line 15C --im getting taxable amount of the 5500 distribution( return of excess) as 877
    on line 18 --I'm getting taxable amount of the 2021 backdoor conversion as 4623.

    so total of 5500 (887+4623) goes on line 4b on my federal 1040. ( only added 5500$ to my taxable income)

    1. Does this calculation look correct.

    2. If yes, Should I also add this 5500$ on my NJ 1040 ( state of my residence)

    My Hrblock live tax professional has no clue what Im talking about.

    Thank you.

    Last edited by PecanPie; 04-04-2022, 05:53 AM.

  • #2
    Here is a WCI post on the topic:

    Just on the return of excess, if it was an after tax non deductible contribution in the first place I do not think it should add to your taxable income. If originally deductible, then it would be income.

    Yes, if there is either an addition or a subtraction to federal income you should pull through to your state taxes.


    • #3
      Agree with Larry - you were ok until the part about adding the $5,500 to income. Go back and check your inputs.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087