Menu

Missed conversion deadline, best strategy for back door Roth

Home Retirement Accounts Missed conversion deadline, best strategy for back door Roth

  • Avatar steve_togo 
    Participant
    Status: Other Professional
    Posts: 1
    Joined: 04/10/2019
    medical school scholarship sponsor

    I am sorry its not clear can you please explain if what I am trying to do is ok.

     

    I have started the rolling of my TIRA funds into my 401(K). Can I still contribute into Non Deductible IRA for 2018 and later convert it to Roth after the TIRA balance has been moved to my 401k. Will I pay any taxes as the conversion might not be over by April 15th 2019.

     

    Thank!

     

    #205491 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7794
    Joined: 01/09/2016

    Yes, you’ll be fine. Just get the IRA into your 401k before 12/31/19 and you will not owe pro-rata taxes.

    Welcome to the forum!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #205552 Reply
    Avatar rss544 
    Participant
    Status: Attorney
    Posts: 2
    Joined: 04/15/2019

    Great thread so far! Follow up question to the above comments: There seems to be an issue with my accounts on Merrill’s end but long story short, I made a $5,500 contribution on April 11, 2019 into my TIRA (which previously had a balance of $0), and attempted to convert this entire amount into my RIRA. It doesn’t look like my $5500 contribution can be converted until tomorrow because of an issue with Merrill’s IT system. If that is the case, can I still convert tomorrow after my taxes are filed and if so, would this contribution be classified as a RIRA contribution for 2018? And if that’s the case, would I just pay the taxes on any gain (which would be $0 as it would have accumulated interest for 3 days) on my TRIRA during that period?

    Thanks in advance and sorry if this has been answered previously in the comments and I missed it.

     

    #206551 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7794
    Joined: 01/09/2016

    It doesn’t matter when you make the conversion. It’s when you contribute that is counted on a “tax return” year. Conversions are counted strictly on a calendar year basis. So your contribution will count for 2018 because you made it before 4/15/19. The conversion will be reported on your 2019 return. Be sure to file a Form 8606 for both years.

    Edited to add: And welcome to the forum!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #206571 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3988
    Joined: 01/08/2016

    You already contributed for 2018. Conversions can happen anytime.

    #206573 Reply
    Avatar rss544 
    Participant
    Status: Attorney
    Posts: 2
    Joined: 04/15/2019

    It doesn’t matter when you make the conversion. It’s when you contribute that is counted on a “tax return” year. Conversions are counted strictly on a calendar year basis. So your contribution will count for 2018 because you made it before 4/15/19. The conversion will be reported on your 2019 return. Be sure to file a Form 8606 for both years.

    Edited to add: And welcome to the forum!

    Click to expand…

    Thank you very much! So to confirm, I just report this on Form 8606 as a non-deductible contribution of $5,500 into my TIRA and then can worry about converting tomorrow (ie, my conversion of these funds into a RIRA gets reported on next year’s tax return)?

    #206653 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7794
    Joined: 01/09/2016
    Earnest refinancing bonus
    Thank you very much! So to confirm, I just report this on Form 8606 as a non-deductible contribution of $5,500 into my TIRA and then can worry about converting tomorrow (ie, my conversion of these funds into a RIRA gets reported on next year’s tax return)?

    Click to expand…

    Yep, you got it. You’ll complete form 8606 p1 for 2018 and p2 for 2018, for this transaction only. If you make a 2019 backdoor Roth, you’ll include on your 2019 income tax returns along with your 2018 conversion. Depending on the timing of the conversion, part 2 could be reported on your 2019 1040 or your 2020 1040 (again, pg2 for the conversion.

    You’re doing fine. The first year is the most difficult.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #206657 Reply

Reply To: Missed conversion deadline, best strategy for back door Roth

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

Notifications Mark all as read  |  Clear