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forgot to convert backdoor Roth

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  •  pigwet 
    Participant
    Status: Spouse
    Posts: 2
    Joined: 02/10/2017

    In an attempt to finally do a backdoor Roth, last year my wife contributed post-tax $5500 to a normal IRA for 2018. I thought I had converted it to a Roth, because I eventually purchased some index funds, but apparently I never remembered to actually convert to a Roth. Grrr.

    I called up the brokerage firm today and asked a few questions. I was satisfied with their answers and ended up doing the conversion today, in Feb 2019. Since she has no other IRA’s, I only had to convert that year’s value which was actually down from the $5500.

    First question is, given we make over the Roth limit, and given that she’s maxed out her university retirement plan (not a 401k, but an “alternative retirement plan” that is a fixed percentage of her income), maxed out her 403B and 457B, is there a penalty to having that $5500 IRA open for all of 2018?

    Second questions is how do I treat that contribution in this year’s taxes? We were issued a 5498 IRA form that states the contribution. Do I simply do nothing?

     

    #189247 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 6697
    Joined: 01/09/2016
    is there a penalty to having that $5500 IRA open for all of 2018?

    Click to expand…

    Nope. You can wait years to convert if you want. You’ll just pay ordinary income taxes on any growth when you do convert.

    Second questions is how do I treat that contribution in this year’s taxes? We were issued a 5498 IRA form that states the contribution. Do I simply do nothing?

    Click to expand…

    You’ll report it on Form 8606. There will be no tax effect. For 2019, you’ll report the conversion.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #189276 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 199
    Joined: 06/12/2017
    First question is, given we make over the Roth limit, and given that she’s maxed out her university retirement plan (not a 401k, but an “alternative retirement plan” that is a fixed percentage of her income), maxed out her 403B and 457B, is there a penalty to having that $5500 IRA open for all of 2018?

    Click to expand…

    No.

    Second questions is how do I treat that contribution in this year’s taxes? We were issued a 5498 IRA form that states the contribution. Do I simply do nothing?

    Click to expand…

    You will receive a 1099-R that will report the taxable amount, if any, associated with the Roth Conversion.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    http://www.fswealthadvisors.com | (717) 496-0900

    #189277 Reply
     pigwet 
    Participant
    Status: Spouse
    Posts: 2
    Joined: 02/10/2017

    Thank you both!

    #189281 Reply

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