[Editor's Note: Many high-income professional investors first learned about the Backdoor Roth IRA on this site. One of my most popular posts is the tutorial on the process. In the lengthy comments section of that post, many people asked how to handle a Backdoor Roth IRA (especially form 8606) if you contributed in the next calendar year. While it is “cleaner” to make your contribution and your conversion all in the same calendar tax year, you can make your contribution up until your tax filing date of the next year. I was going to write a post on the subject and then, lo and behold, a guest post on the subject showed up in my email box. The writer wanted to stay anonymous and we have no financial relationship.]
Maybe you are a new reader and just saw the light this January. Maybe you were reading up on the Backdoor Roth and December 31 flew by you. Maybe you are new to financial planning and weren’t sure if you’d have enough money to make the $6k contribution this year (Not very WCI of you! See, that’s where the planning portion kicks in). Or maybe you were waiting to see if you could afford your new boat and still have enough left over from your bonus to make the Backdoor Roth happen (please, please don’t let this be the reason — and if it is, for Pete’s sake, don’t admit it here!).
Whatever the reason, you have found yourself ready to do a Backdoor Roth for the previous year. You’re wondering if you can make a non-deductible contribution in 2015 to your 2014 traditional IRA and still get in the back door. If so, how do you do this?
How to Fill Out Form 8606 for Backdoor Roth Late Contributions
Great question. If you’re like me, you re-read the posts on Backdoor Roths here a million times trying to find the answer. You scour other websites but find yourself back here. You locate WCI’s generous image postings of how to fill out Form 8606 but can’t find an example of a procrastinator such as yourself who is contributing late. So instead, you head over to the IRS website, pull down the Form 8606 yourself, and try to make heads or tails of what seems like a foreign language, realizing of course that you are not a CPA but just a DIYer (that is my caveat emptor, by the way).
Below, you will see a Form 8606 filled out with 2014 values in the appropriate boxes, and the numbers for your 2015 Form 8606 in the margin on the right. Don’t worry, I’ll step you through it. Please note that this setup shows a conversion when there have been no gains in the prior year contributions so that there are no taxes due on gains.
Line 3 is your total tIRA contributions, including previous and current year. For 2014, that would be only the $5500. For 2015, that would be the $5500 for last year and the $5500 for this year. For the 2014 year, the answer to the Question in Line 3 is NO, so you enter the amount from Line 3 into Line 14 and skip the rest of Part 1. For your 2015 taxes, Line 4 represents the late contributions you made in 2016 to your 2015 tIRA ($0 since you were diligent this year) and Line 5 represents the late contributions you made in 2014.
Line 6 is the total value of your tIRA on December 31st, this is the information that will affect the pro rata rules. Since you have no previous non-deductible contributions because you have been a good little WCI minion and cleared out previous IRA accounts, this will be $0 as well.
Line 8 you skipped for 2014 because you answered NO to Line 3. In 2015, you will be converting the full amount in your tIRA to a Roth.
Line 11 is the non-taxable portion of your conversion — which, if you’ve done things right, should be the full amount you are converting — $11,000.
Line 14 is the basis in your tIRA for the current year and prior — which should now be $0 in 2015 because you just converted all of it to a Roth (remember, previously it was $5500 for the contribution year 2014 before you converted.)
Line 16 is the amount you converted to Roth. For 2014, that is $0, for 2015 that should be the full $11,000. Line 17 is the non-taxable portion that you converted. This should be $0 for 2014 and $11,000 for 2015. Line 18 is the taxable portion of your conversion. This should be $0 for both years since you did not do any conversion for 2014 and you converted only non-taxable (i.e. already taxed) portions of the tIRA for 2015. [Editor's Note: Whether you're doing your own taxes or paying someone else to prepare them, be extra sure to check that line and make sure it is zero. Many doctors have accidentally paid taxes twice on their Backdoor Roth IRA money.]
Looking Ahead
That should be it, you’re done! Now make sure to make your contributions in the future during the year for which you are contributing — remember, it’s time IN the market that counts, not timing the market!
What do you think? Any questions? Are you doing a Backdoor Roth IRA? If not, why not? Is there anything we can do here at WCI to make it easier for you? Comment below!
This is going to expose our major financial ignorance, but I need help. My husband and I each have traditional IRA’s that have way too much money sitting in them. We did not learn about backdoor Roth IRA contributions until now. What should we do? We just contributed money into our accounts for 2018 (pointless…it was just a habit I guess) and now have over 20,000 in each. He has a retirement plan through work but I do not work nor have any other accounts set up. Is it too late to do anything for our 2018 taxes? Going forward in 2019, it sounds like we need to create Roth IRA’s and convert the max amount of 5,500 into them for both of us and then roll over everything else that’s left into 401k’s (I should make an individual one). Is this correct? Help!
If most of it is non-deductible, I’d just convert it all to a Roth IRA and start doing Backdoor Roth IRAs ($6,000 a piece for those under 50 in 2019.) Can you afford the tax hit on just converting it all?
I believe so. What would the tax hit be for converting over 2 Trad IRA’s of $21,000 a piece? Is there no limit technically to how much you can convert over? I’m assuming there’s nothing we can do to help our 2018 tax return since our basis amount for Dec 31 would be so big. Thank you for replying!
Does this apply if I started a traditional IRA in December 2018 (post-tax contribution), and also started a second traditional IRA with 6000K in July 2019 which has been rolled into a new Roth? Can I roll my 2018 contribution into this Roth as well, or is it too late to do so? Thanks!
You can do a Roth conversion at any time. The only deadlines are for contributions.
I procrastinated and didn’t have a Roth IRA set up in time to convert from my Traditional IRA. I should have my Roth set up by January 2 or 3rd. Should I go ahead and convert to Roth IRA immediately or does it matter? I’ve already read the blog on reporting it on my tax forms for the next two years. Also, whenever the Roth is set up do you have a blog or recommendations for diversifying?
Might as well do it ASAP.
Sounds like you need an investing plan if you’re not sure how to invest your money.
https://www.whitecoatinvestor.com/investing/you-need-an-investing-plan/
If I had a balance in a sep ira as of December 31 2019 does that disqualify me from contributing in Jan 2020 to a backdoor roth for 2019? Thanks everyone for sharing your knowledge!
No.
Thanks for this post, hoping it will still guide me through this challenging process.
I made a 6k deposit into a traditional IRA toward the end of December, with the intent to convert it to a Roth the next day. There seemed to be a delay of several days before Vanguard allowed me to convert it to the Roth. By the time I was able to convert, it was January. Will that cause a problem if I move forward with the Roth conversion? Am I going to have to pay taxes on the 6k?
Thank you,
Quincy
The only problem is your tax forms will be slightly more complicated as noted in this post. But no big deal.
Hello WCI,
Just recently found out your website and I want to thank you for all the posts I’ve read so far. Very useful information!
Here’s my situation:
I contributed to 2 different traditional IRAs under my name consistently since 2015 till 2020, maximizing the limit for each year, except 2018. That year, I contributed 11000 and I don’t remember why. Probably because I think I am married that year and as such I am qualified for 11K? Some way some how I was able to get through. I contributed late for the year 2019 in 02/2020. Now I want to convert both traditional IRAs to backdoor Roth IRA. What is the best way for me and what forms including 8606s I must fill out?
Any advice would be appreciated.
Why are you contributing to 2 IRAs? You only get to contribute $6K/year (less in prior years) no matter how many IRAs you put it into. Are you talking about a spousal IRA? Because that is in your spouse’s name. Otherwise, you’re overcontributing to IRAs and need to reverse that. Fix that, then worry about Backdoor Roth IRAs.
No, they are both in my name.
Why do I have two traditional IRAs? Ignorance and didn’t join WCI at the time I guess.
How do I reverse the overcontribution?
Many thanks
https://investor.vanguard.com/ira/excess-contribution
Filling with H&R block and going through 8606.. I made contribution of 6000 for 2019 and 6000 for 2020 in february 2020 to traditional IRA. I did the same for my wife who had 500 in her traditional IRA on 12/31/19. I did conversion for both accounts.
H&R block has:
Line 1 6k
line 2: 6k
line 3: 12k
line 14: 12k
Is this correct? Shouldn’t hers be different because of the 500? not sure what I’m missing.
Are you filling out 2019 I assume? If so, line 1 should have $6K on it but line 2 shouldn’t. That shows up in 2020. Unless you did the same thing last year. You know you have to do two 8606s right? One for each of you.
Yes filling out for 2019 taxes. I’ve got a form for both of us.
So i think mine should be
L1: 6k
L2:0
L3: 6k (or 12K??)
L14 6K (or 12K??)
Hers: the basis is 500 correct? so effects line 2?
L1: 6k
L2: 500?
L3: 6500?
L14: 6500?
$6K.
I don’t know what her basis is. But yes, basis goes on line 2.
I guess her basis would be zero too?
the 500 she had in her tIRA was deductible (from a employer rollover) so I will owe taxes. I just dont know how that needs to reflect in this form to show that?
am i correct that lines 3&14 would be 6k and not 12K this year?
Again, I don’t feel like I have enough information to give you advice. You’re writing a sentence or two but not telling me what was in there in 2017 and how much of it was basis, what was contributed and converted in 2018, what was contributed and converted in 2019, what was contributed in 2020 for 2019 etc. Without that info, I’m afraid I’m going to tell you the wrong thing.
I would suggest you work your way through the form/instructions and if you have a question about a specific line, provide all relevant information for that line and perhaps I can help.
So I am clearly new to investing and still learning. First and foremost thank you for this website and forum! I have been trying to find the answer on my own but am still a little confused.
I had a 403b from fellowship that was converted to a rollover IRA during 2019. At the time of rollover (mid year) the balance was $3,967. 37. As of 12/31/19 the account was up to $3,976.83 ($9.46 in dividends). Due to the account, I was unable to roll it into my new 401(k). My plan was to covert it to ROTH and just pay the taxes since it was a small amount. I obviously did not do this before the end of the year. By the time I did convert it to a ROTH in 2020, the balance was up to $3,985.20. I want to make up the difference with nondeductible contributions to get to the $6k for 2019. My plan is to contribute $2,014.80 to get to a total of $6k for the 2019 ROTH (plus another $6k for 2020). My questions are as follows:
1. How do I fill out my 2019 8606? I am not sure what to put in line 1 since technically it should be $2,123.17 (the basis for line 2 is $3,976.83) to make a total of $6k for line 3.
2. So should I actually be contributing the full $2,123.17 instead of the planned $2,014.80? I am under the impression it is okay to actually go over the $6k limit since this a backdoor ROTH conversion?
3. Since I did not take a distribution or make a conversion in 2019 the remainder of the 8606 form should be blank except line 14 which will be $6k correct?
I realize this will make my 2020 8606 a little messy. I’m sure I will have fun with that, but I really want to make sure I get the 2019 one right. Thanks in advance!
Rollovers don’t count toward your annual contribution limit.
1. Well, if you put $6K in an IRA as a 2019 contribution now you would fill it out like in the post above. If you don’t, you don’t even fill out an 8606 for 2019.
2. Contribute $6K
3. Yes.
I am very late with contributing my additional 1099 income. I am primarily employed in the military and received a W2. I contribute and max the ROTH TSP through the military. I also moonlight and have 1099 income. I have procrastinated a significant amount this year and am wondering how to make my 1099 income as tax deductible as possible. I am too late to open an individual 401K, but I should be able to contribute to a SEP IRA for 2019 taxes. Is it possible to convert this SEP IRA via backdoor Roth for the 2019 tax year?
Yes, it is possible to convert a SEP-IRA to a Roth IRA. I wouldn’t call it a Backdoor though. I wouldn’t even do it (well, maybe I would if I were in the military). I’d roll it into the new i401(k) I opened for 2020.
Hello,
I did the late backdoor Roth conversion for 2019 tax year in 2020 (both IRA contribution of after tax dollars and the Roth conversion happened in March 2020) with Fidelity. However Fidelity didn’t send me a 1099R form because according to them the Roth conversion should have happened by the end of 2019 for it all to count as a 2019 backdoor conversion.
Is this true? Should I have gotten a 1099R?
Thanks for your advice!
To add to the above, my H&R Block tax accountant is telling me that there is a penalty because I don’t have a 1099R form.
There was no distribution out of the traditional IRA and into the Roth IRA via the backdoor conversion method for 2019 tax year because I did the conversion in 2020 calendar year.
The contribution step is recorded on your 2019 taxes. The conversion step is recorded on your 2020 taxes. No, there isn’t a penalty. I have no idea what your accountant is referring to. Did you do some other IRA conversion in 2019 and get pro-rata’d or something?
No, no other IRA conversion was done. I don’t have any other IRA accounts and this year I opened an IRA account specifically for the backdoor Roth IRA conversion. H&R Block tells me the lack of a 1099R form for 2019 is causing a penalty of $500. I made the allowed $6000 after tax contribution to a non-deductible IRA. Very frustrating.
I would be very grateful if you could recommned a good tax accountant.
Thanks much.
Here are my recommended folks:
https://www.whitecoatinvestor.com/tax-strategists/
Thank you very much!
I am curious, as I didn’t see H&R Block on the list, but I see Turbotax professionals on the list. Is the latter better?
Btw. our H&R Block tax accountant left the 2nd page of form 8606 out of the tax return. I have been asking for it as that’s where the total taxable amount line is located. Sigh….
I really appreciate all your responses!
I don’t know that H&R block is particularly better or worse than Turbotax, it’s probably just what you are used to. I don’t think we have an affiliate relationship with H&R Block anymore (if we ever did) so that’s likely why they’re not on my recommended page. Remember there are two requirements to be on those recommended pages: # 1 Offer great service and # 2 Buy ads from us.
Hello WCI, I’m trying to figure out if I made a mistake or have caused complications for our 2019/2020 returns after trying to still get in a 2019 backdoor Roth contribution for my wife earlier this year. Would appreciate your input. She has an existing Individual 401k, and had a tIRA with a $14k balance still as of 12/31/2019. In March 2020 I did an internal transfer from her tIRA to Individual 401k trying to “hide” the $14k from pro-rata implications, but after re-reading I may have screwed up by not doing that by 12/31/2019. Once the transfer was complete she made the 2019 non-deductible contribution to the empty IRA, then finally the conversion to her Roth IRA. We were trying to make sure the tIRA was emptied before starting the backdoor, but I don’t think realized that had to be done by the end of the year (true?).
It looks like everything is fine for 2019’s 8606 (matches your example in this article with the late contribution), but now I’m nervous about possible pro-rata impacts on the 2020 conversion since both the internal transfer to Individual 401k and backdoor conversion will be on 2020 1099-R’s, and those probably won’t show the days they occurred to prove the tIRA was empty at time of non-deductible contribution .
Yes, we are not going to do this again and have already made our 2020 contributions and roth conversions :).
Advice? Thank you!
No mistake here, you just need to report it correctly. The 2019 contribution will go on your 2019 taxes and Form 8606. The conversions will all go on your 2020 taxes and Form 8606. The IRA just needs to be empty by 12/31 of the year you do the conversion step.
Great, thank you very much! Your last sentence is the key. I was thinking it had to be empty the year the contribution applied to.
Thank you WCI, this article helped me so much! The 8606 example = LifeSaver!
I was struggling with this situation, as blindly answering the interview questions in the tax software was giving me incorrect results. (And in one case, an over-contribution penalty.)
Putting the Backdoor Roth IRA aside for a minute, if I have a SEP-IRA with a large sum in it and want to roll it over to a Roth IRA for the 2020 tax year but it is already Feb 2021, am I able to still do that and have the taxes owed that are triggered by this rollover apply to my 2020 tax return? Or can you only claim the rollover for the calendar year that you actually do the rollover?
I have not opened or funded the Traditional IRA yet for the Backdoor Roth IRA. Would I be wise to just wait until after tax day April 15, 2021 to do open and fund a tIRA and convert to a bdrrIRA? If I did it now for 2020, could I do it again after April 2021 for 2021?
No reason to wait. You can do 2020 and 2021 tomorrow.
I just recharacterized my $6000 Roth IRA contribution to a traditional IRA that I opened a few days ago through Vanguard. It went through a mutual fund holding, so I have more than a $6000 balance sitting in the traditional IRA. When I convert this back to my Roth, should I convert all of my account so that my traditional IRA balance is $0? Can I even still do a backdoor Roth?
Yes.
Yes.
You’ll owe taxes on the gains from the conversion.
Thank you!
Hello,
My wife in 2017 (in March of 2018) made a $5500 nondeductable contribution to an IRA. In March of 2019 she converted that whole balance of 5614.45 to a Roth IRA and contributed $5500 to a new TIRA for 2018. In March of 2020 she took to the balance of the TIRA ($5655.97) and converted that to a Roth (and combined with earlier account). She also made a $6000 contribution for 2019 into a TIRA. Now in 2021 I see I should have converted them the next day and not waited a year to convert. I want to contribute $6000 for 2020 but I want to get my 8606 right and clean it all up. I have basis from previous 8606. Please note every year I convert the entire balance over. The 8606 in 2019 is:
1. $6000
2. $11000
3. $17000
4. 6000
5. 11000
6-12 were left blank from using worksheet 1-1 in 590-B
13. 5614
14. 11386
15a-c 0
16. 5614
17. 5614
18. 0
Now for 2020 I would have basis for line 2 as 11386. If I make a contribution of $6000 for 2020, my 2020 8606 would be:
1. 6000
2. 11386
3. 17386
4. 6000
5. 11386
6. 6069.72 (this is the FMV of the IRA as of 12/31/20. Is this correct?)
7. 0
8. 5655.97 (conversion done in 2020)
9. 11725.69
10. 1.0 11. 5655.97, 12. 0, 13. 5655.97, 14. 11730.03. 16 and 17 both 5655.97. Did I do this 8606 right? How can I clean this up? Make the $6000 for 2020, $6000 for 2021 and convert the next day? How do I get that basis back to 0? Thanks!!
Yes, convert it all, that gets you back to zero eventually. You keep getting pro-rated, but that’ll go away too. Just do your contributions and conversions during the calendar year from now on.
As far as whether you filled it out right, you just work your way through the instructions. Was there a line you weren’t sure about?
As far as whether you need to use Worksheet 1-1 or not, I’m not entirely sure. I usually don’t bother and things work out. I guess it comes down to whether the conversion counts as a distribution.
I think not, because I would argue you didn’t take a distribution.
Either way, as long as your tax bill works out to be what it should be, I wouldn’t worry too much about it. However, I don’t think that’s the case for you on your 2019 8606. You did a conversion of $5614, no? Some small amount of that should be taxable. You have to pay taxes on the gains when you do conversions. So I think you did the forms wrong.
Personally, I’d just work your way down the 8606s and not fuss with the worksheet.
So 2019 8606:
1: 6000
2: 11000
3. 17000
4. 6000
5. 11000
6. ? I don’t know what this is because you didn’t tell me.
7. 0
8. 5614
9. Line 6 plus 5614
10. 11000/line 6 plus 5614
11. 5614 * line 10
12. 0
13. 5614 * line 10
14. 17000-(5614*line 10)
15a. 0
15b. 0
15c. 0
16 5614
17 5614 * line 10
18 5614 – (5614 * line 10)
But there’ll be something you owe there.
Hope that helps. Once you have your 2019 8606, you can do your 2020 8606.
The line 7 instructions on Form 8606 support my position that you don’t need to do that worksheet.
Hi WCI,
Thanks to your website my wife and I made our first sets of tIRA contributions and Roth conversions last year, in the full amounts for TY2019 and TY2020. When filing my 2019 return via TT, both my wife’s and my 8606 form look identical to the column 1 in the example from the article, except the values are 6000 instead of 5500.
Now that I’m working on my 2020 return, I’m trying to get my 8606 to look like column 2. I fear that my insistence on using TT for all my forms is akin to using a screwdriver to hammer a nail. No matter how many ways I’ve filled out their queries, I can get to a point where there is no change in the refund due, but I can’t make the 8606 look right. What I get for my 2020 form is:
1. $6000
2. $12000
3. $12000
4.
5. 12000
6-12. blank with a footnote *From Taxable IRA Distribution Wkst (per IRS Pub. 590-B)
13. 12000
14. 0
15a. 0
15b.
15c. 0 * the asterisk appears again
16. 12000
17. 12000
18. 0 * one last time for good measure
19-25c blank
My question is, how important is it to get boxes 6-12 to fill correctly? Is this IRS 590-B reference satisfactory for representing that the contributions were made the right way? I realize the chances of audit in the US are quite small, but I’d hate for something silly like this to steer the IRS onto my case.
Thanks in advance, Zach
Turbotax likes to use that worksheet. It’s fine that way. As long as it’s a $0 on 15c and a $0 on 18, it’s all good. In fact, I’m sure at least a few of mine have gone in that way because that’s the way Turbotax does it.
My interpretation is that they don’t have to do the worksheet in 590B, they can just go down the form since you didn’t take an IRA distribution, but I can see how someone else might interpret it differently. The good news is the end result will be the same.
I messed up with Covid and got cold feet for my backdoor contributions so I did *NOT* contribute my tIRA 6,000 in 2020. I was previously *LATE* with my 2019 contribution as well (6,000). Would you be so kind to explain what to put on my 2020 8606 for my scenario? Thank you so much for your insight and this running thread. You are helping so many people like myself.
-I did a late 2019 tIRA contribution of 6,000 which was made in 2020
-This late 2019 6,000 was converted to rIRA in 2020
-I plan on doing another late tIRA contribution (sorry!) for 2020
(This will be made in 2021, and converted to rIRA 2021)
(Side note, I plan on doing my 2021 tIRA ON TIME this year)
From what I can tell I should fill my 2020 8606 as follows;
1: 6,000
2: 6,000
3: 12,000
(YES)
4: 6,000 (?)
5: 6,000 (?)
6: 0
7: 0
8: 6,000
9: 6,000
10: 1.000
11: 6,000
12: 0
13: 6,000
14: 6,000
15a: 0
15b: 0
15c: 0
16: 6,000
17: 6,000
18: 0
(no distributions from rIRA were made)
You know you can still make a 2020 IRA contribution right? So make that and include it on your 2020 8606. But basically your situation is the one this post is written about. So you can just follow that example. It looks to me like you did. Certainly 15c and 18 have $0 on them so looks like you did it right.
Yes this situation reflects 2019 and 2020 tIRA contributions, with only my 2019 being converted to rIRA since my 2020 contribution is late.
My 2021 return will have 12,000 (19&20) basis with an additional tIRA 6,000 made ON TIME for 2021 with 12,000 rIRA conversion (20&21).
I want to do a late 20’ contribution to my tIRA so i can also do one for 21’
Jason, did you ever figure out if this is correct? I am literally on the same [procrastination] boat as you. Same scenario and that is the exact numbers I am getting via turbotax, let me know, thanks!
I have been doing my tIRA to rIRA conversation through E*Trade. I noticed a tax document associated with my tIRA account titled “1099-R.” Is this ok?
Probably. Does it say something funny?
It says a “distribution” was taken of $6,000 (box 1), and a “taxable amount” of 6,000 (box2). Distribution Code 2. It says they are required to do the form and report to IRS even if it is a conversion, and that the rIRA account should produce a 5498. But my rIRA account doesn’t have one posted…
Check the fine print.
Sometimes the custodian will issue a 1099-R with a taxable amount listed, but they will note that the taxable amount may not be accurate.
It’s up to you (and/or your accountant) to report the correct taxable amount.
Exactly. See if they checked Box 2B. If they didn’t, have them issue a correct one.
Box 2B IS checked
Then you’re good to go.
I got a 1099R from vanguard after performing backdoor roth with late contributions. Boxes 1 and 2a both have 12003.45. Turbo tax is telling me they have to put 12003 as Taxable income because that what it says in box 2a even though they were nondeductible contributions that were converted. Am i missing something? what can i tell him to get the basis to 0 on the 8606?
Is 2b checked? If not, have Vanguard reissue a correct 1099R for you.
There is an X in 2b.
What can I tell TurboTax to ignore the taxable amount as they claim “we have to put it down as it says”
Then you’re great. That looks just like my 1099 R.
I’m no Turbotax guru and it is often harder to learn Turbotax than the tax code, but my recollection is that there is a little box you can check in there saying 2b is checked. If nothing else, just put zero in the taxable amount line.
https://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html
So I was a bad for 2 years in a row and the 8606 form is making me quite confused.
Here is my scenario:
– Between Jan-April 2020 contributed for my 2019 traditional IRA and converted to Roth IRA (did not file 8606, so will be filing 2019 as example in first form with lines 1-3 and 14 only)
– Between Jan-April 2021 contributed for my 2020 traditional IRA and converted to Roth IRA
– Plan on catching up and contributing for 2021 and converting this year.
My issue is my 2020 form (turbotax) looks different than the side columns for 2015 above:
Line 1 has 6,000
Line 2 has 6,000
Line 3 has 12,000
Now it starts to get different..
Line 4 has 6,000 instead of 0 (presumably because I did 2020 contribution in the Jan-April period of 2021)
Line 5 then only has 6,000
Line 6-12 are blank (saw on a previous post that can be normal for turbotax???)
Line 13 has 6,000 and does not match line 3
Line 14 has 6,000? I thought I would have 0 basis in traditional IRAs?
Line 16 6,000 (I am assuming it should be 12,000 since I converted both 2019 cont and 2020 cont in the year 2020?)
Line 17 Also has 6,000 (once again think it should be 12k?)
This was automatically generated by turbotax and I followed the turbotax software guide from financebuff linked here on WCI. Is this right? Help! Thank you in advance!
It sounds like you didn’t do a conversion in 2020. So there shouldn’t be a 2020 conversion documented. The conversion done in 2021 should go on your 2021 8606.
This (2020 tax year) was my first year recharacterizing a Roth and I did it in February 2021. My tax transcript from the IRS states in the Form 8606 section that I have $0 Taxable Nondeductible Contributions. Since I made a taxable nondeductible contribution via recharacterization my first thought that there was a problem. However, I’m wondering if this is normal and come next year there will be an amount on this line equivalent to the gains made on the Roth IRA that was recharacterized in 2021. May I have your opinion this please?
No, the contribution (originally Roth but recharacterized to traditional) should be recorded on your 2020 8606 tax year as a traditional IRA contribution.
So I’m not sure what’s going on, nor do I know what an “IRS tax transcript” is. Is that what you call your return?
The gains should show up as a conversion when you convert to a Roth IRA.
I only discovered this myself, but here is the link: https://www.irs.gov/individuals/get-transcript
It produces a text-based format of the tax return filed.
On my transcript there is a section for Form 8606 as will yours if you use that form. The first line of that section is the one I’m confused about. I think it has to do with crossing the calendar year when doing the recharacterization, but since it is my first year doing this I don’t know what the $0 (on my form) means.
What line is the $0 on?
Here’s the section copied from my transcript (2nd line with ** is the one that is odd to me)
Form 8606–Nondeductible IRAs
(Occurrence #: 1)
SPOUSE INDICATOR:……………………………………………………0
**TAXABLE NONDEDUCTIBLE CONTRIBUTIONS:……………………………….$0.00
TOTL AMT IRA CNVRTD TO ROTH IRA:…………………………………..$0.00
IRA BASIS BEFORE CONVERSION:………………………………………$0.00
TAXABLE AMOUNT OF CONVERSION:……………………………………..$0.00
ROTH IRA BASIS BEFORE CONVERSION:………………………………….$0.00
TRADITIONAL, SEP AND SIMPLE IRA DISTRIBUTIONS:………………………$0.00
So my question is about the 2nd line given that I recharacterized my 2020 Roth IRA to a non-deductible IRA. I would think that the line would reflect the amount recharacterized. I don’t know why it is $0…is it because I won’t be taxed for the gains that were recharacterized until I file 2021 taxes maybe?
I would have guessed it would be $6K not the amount recharacterized, but I don’t really know what to make of it. I’m not really sure what you did though, but if I were only paying taxes on the gains I converted, I wouldn’t worry about it too much.
Yeah, good point. Since no deduction was taken on the return the only taxable event was the conversion, which was in 2021. The untaxed gains ($600) from when the money was held in the Roth IRA *should* be the only portion I owe taxes and from what I’ve read, taxes from conversions are paid in the year of the conversion (2021), not for the year the IRA was funded (2020). If this is correct, this year’s transcript for form 8606 should show:
TAXABLE NONDEDUCTIBLE CONTRIBUTION: $600
Thanks for helping me to work through this!