First backdoor roth attempt

[huskie92]

Hi all,

So I went and got my vanguard accounts all set up and I transferred 5500 into each of our IRA's yesterday and am now ready to convert to roth. What I didn't realize is that I just added the 5500 to the federal money market (settlement fund) instead of an actual vanguard fund (i.e the Prime Money Market like WCI and PoF suggest). Can I still do the backdoor conversion from the settlement fund or do I need to do it from the Prime Moneymarket? I assume if I buy into the Prime I would just have to wait a day to do the backdoor right? I am sure this is a basic thing but I don't want to goof it up my first try!

Thanks very much!

[childay]

It doesn't matter, you can still convert it.  Those funds are essentially the same.

[ACN]

As above, just click on the 5500 and click Covert to roth.

[The Physician Philosopher]

I had some issues doing my first backdoor Roth conversion, which is why I created this:

Step by Step Guide to Backdoor Roth at Vanguard

Let me know if it isn't clear, happy to make changes or answer questions.

TPP

[huskie92]

The Physician Philosopher wrote:

I had some issues doing my first backdoor Roth conversion, which is why I created this:

Step by Step Guide to Backdoor Roth at Vanguard

Let me know if it isn’t clear, happy to make changes or answer questions.

TPP

Click to expand...

Great stuff! Thank you very much. I see a lot of familiar screens in your post. Good to know I am not doing anything wrong. I just need to wait out this initial period.

[The Physician Philosopher]

Happy to help. Obviously had some trouble, too, and grew tired of seeing the same error screen for four days.

[huskie92]

Finally worked! I got a couple emails that my "account changes" had completed successfully this morning. So, I went into Vanguard and hit the "convert to Roth" button and it went right to the transfer screen. No more annoying popup. Converted both accounts straight away. I assume now that my 2018 contributions should go just as smoothly. Thanks again!

[huskie92]

Sorry to drag this back up @The-Physician-Philosopher but when you did your 2017 contribution in 2018 is there any other document for tax purposes other than the 8606 for for the 2017 tax year IRA contribution?

Does the conversion paperwork then come for the 2018 tax year since you actually did the conversion in 2018? So, technically come tax time in 2018 I will have to file two 8606 forms and four conversion forms? Or can/should the 2018 8606 forms be filled out right when I do the contribution?

Thanks!

[The Physician Philosopher]

Hey Huskie,

No problem! We are all here to help each other in this crazy thing called life, including taxes.

You will have one 8606 form each year for each person that did a backdoor Roth (so if you are married, you'll have two. One for you and one for your spouse).

If 2017 was the first tax year you contributed you will report your non-deductible contributions. In 2018 (assuming you do it again) you will report your contriutions and conversions.

So... To summarize. Report your 2017 tax year contributions on the 2017 8606 and the conversions for 2017 (done in 2018 calendar year) on the 2018 tax year 8606.

Let me know if this doesn't make sense.

[huskie92]

Thanks so much for the explanation! So I am good to go for now with just the 2017 contribution.  Come next tax season I will have two sets of conversions to deal with but after that it should be just one set per year as I don't plan on missing any conversions from here on out.

[The Physician Philosopher]

Yes, next year we will have to fill out the 8606 and report all of the conversions performed in 2018 calendar year (will total $11,000 for both my wife and me... Or $22,000 total). We will also have to report our $5500 contribution for each of us (total of $11,000) for the 2018 tax year.

Therefore, each of our 2018 tax year 8606 forms (must fill out one for you and one for spouse) will have $5,500 contribution and $11,000 in conversions.

[huskie92]

Got it! Thanks very much for taking the time to clarify that last point. It’s much appreciated.