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backdoor roth for the first time after years of nondeductible IRA contributions

Home Retirement Accounts backdoor roth for the first time after years of nondeductible IRA contributions

  • Avatar JBME 
    Participant
    Status: Spouse
    Posts: 417
    Joined: 03/26/2018
    Earnest refinancing bonus

    I told my brother all about the backdoor Roth IRA this year. He’s over the income limit to make a direct contribution. However, since 2014 he had been making nondeductible IRA contributions. I told him to convert it all over in order to do the backdoor Roth in the coming years. In 2014 and 2015 he put $2k each year into the IRA. In 2016 and 2017 it was $3k. Last year it was $5500.

    He converted ~$17k over to his Roth IRA. He texted me today because he was confused by the 1099 he got from Vanguard. It says there’s a $17k taxable distribution, and my brother contends only $1k of that is actual growth. I’m pretty sure for his 2018 taxes he just needs to fill out form 8606 and instead of $0 at the end of the form, it’s going to be ~$1k, right? He never told the IRS previously about nondeductible contributions to his IRA since they were after-tax. He’s confused I think because Vanguard doesn’t know what’s what. Is my logic right? I’m going only on what he tells me. He doesn’t think he needs to pay tax on $17k…just $1k. He’s in a very high tax bracket so he wants to make sure he gets it right. Thanks for the clarification.

    #197345 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3618
    Joined: 01/08/2016
    However, since 2014 he had been making nondeductible IRA contributions.

    Click to expand…

    so he should have been filing 8606’s.

    It says there’s a $17k taxable distribution

    Click to expand…

    yes, a conversion is a taxable event. vanguard doesnt know you made the IRA nondeductible.

    2018 taxes he just needs to fill out form 8606 and instead of $0 at the end of the form, it’s going to be ~$1k, right?

    Click to expand…

    itll be whatever his growth is.

    He never told the IRS previously about nondeductible contributions to his IRA since they were after-tax.

    Click to expand…

    see 1st comment.

    #197346 Reply
    Avatar JBME 
    Participant
    Status: Spouse
    Posts: 417
    Joined: 03/26/2018

    Ah so he needs to go back and fill out 8606 for 4 years and submit it? Then 8606 for 2018 will look different since that is when the conversion happened, right? Can he just submit all of these 8606 forms when he files for 2018?

    #197349 Reply

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