[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!
I graduated from state hospital fellowship in July 2021 and (finally) just received a withdrawal rollover from the state pension fund to my traditional IRA worth $7600. What is the simplest way to backdoor Roth all of this and avoid getting pro rata’d? I was thinking of converting $6000 now for 2021 year, contributing another $5400 to the traditional IRA later in the year, then doing another $6000 before 12/31/22, so that the traditional IRA is empty at the end of the calendar year. Is that the right move?
Secondly, will I have to pay taxes on my rollover since it was a state pension fund initially? Honestly I don’t even know if that fund was pre tax or post but I imagine it was pre tax.
Sorry, bad math. Meant to say “contributing another $4400 to the traditional IRA later in the year, then doing another $6000 before 12/31/22”
What do you mean “Backdoor Roth” this? You mean the simplest way to do a Roth conversion? Just move it from your traditional IRA To your Roth IRA and pay the taxes due on an extra $7,600 of income.
Then you can do a $6K Backdoor Roth IRA late for 2021 and a $6K Backdoor Roth IRA on time for 2022. Or heck, dump all $12K in, $6K for 2021 and $6K for 2022 and just do one big Roth conversion of all $20K. It’s really all the same as far as the IRS is concerned.
The rollover doesn’t cost you taxes, but the conversion will.
So the rollover i received from the pension doesn’t apply to the annual limits? I can convert all $7600 from tIRA to Roth now and still do $6k backdoor for 2021 and another $6k backdoor for 2022?
There is no limit on conversions, only contributions. So yes, you can do all that.
In Jan 2021, I made a deductible $6000 late contribution to tIRA for financial year 2020 (deductible because I wasn’t covered by 401K at work) and immediately converted the $6000 to Roth IRA.
Later in 2021, I made a non-deductible $6000 contribution to tIRA for financial year 2021 (non-deductible this time since I was covered by 401K) and also immediately converted the $6000 to Roth IRA.
Turbotax is telling me that $6000 of the distribution from tIRA in 2021 is taxable. Based on the pro-rata distribution rule, it looks like this might be correct, since ($6000 non-deductible)/($12000 total value of IRA) = 0.5, and thus (0.5 tax free ratio) x ($12000 distributions) = $6000 is non-taxable. Is this understanding is correct?
Thank you for the comprehensive information here about filing for late backdoor Roth IRA contribution!!
Yes, it is taxable. You got a tax break for it on your 2020 taxes and now you pay that tax break back. In the end, it’s all the same as if you had never gotten a deduction and never paid any tax. There’s no pro-rata issue here though because the balance of the IRA on 12/31/21 was $0, no?
I’ve had a Roth for years and didn’t realize that for 2021 I went over the income limit to be able to contribute directly. I contributed the max of $6,000 for 2021 and was diligent and have already contributed the max for 2022. I have already filed my 2021 taxes, so what are my options?
Can I still recharacterize the $6,000 for 2021 to tIRA and then do the backdoor contribution back to my Roth and file an amendment to my 2021 taxes? Also, can I do the same with my 2022 contribution, or would it be better to just pull that contribution out because I messed up? I can’t get any benefit from the tIRA because I have a 401(k).
https://www.whitecoatinvestor.com/ira-recharacterizations/
Yes. And yes, do the same with 2022.
I had 6K in my traditional IRA for 2022 on 12/28 and tried to do the conversion today 12/31 but it’s a Saturday and itwon’t clear through till 1/3/2023.
So I have 6K sitting in my tIRA…
Should I just cancel the conversion and leave the 6K in traditional IRA and pay the stupid tax?
Or just let it convert on 1/3/23 and deal with the tax filing with the my accountant.
Long time, first time.
-I contributed 6K into Roth IRA in early 2022.
-In February 2023 I realized we were over the MAGI limit so I then re-characterized but there was a loss and the original contribution was now $5,221.
-For line 1 on Form 8606, do I enter the amount that was re-characterized in Feb ’23 ($5,221)?
-Or do I enter the original Roth IRA contribution made in early 2022 (6K)?
I know this will make future 8606 forms more complicated so I want to make sure I start off with this first one correctly.
No. You enter the original contribution ($6K).
Got it.
-When completing Form 8606 in the following tax year will I enter this same amount (6K) on line 2?
-If yes, where and when do I account for the loss from the 2022 contribution (about $779) on form 8606?
I will also be contributing to the tIRA for 2023 (6.5K) and converting the entire account a few days later.
The loss gets carried over on the basis line, line 14, which then goes to line 2 on the next year’s 8606.
Thank you for all your guidance on this topic! I’m doing this for the first time and would appreciate a double-check here as fidelity is telling I can’t do what I’m trying to:
– I contributed 6K to a traditional IRA in March 2023 (listed this as 2022 contribution). Planning to fill form 8606 for my “2022” tax return.
– Money is now cleared and I’m trying to convert it to a Roth account (as 2022 contribution) but I got an error message so I called fidelity and they told me since this is being done after the Dec 31st deadline it’ll have to be considered “2023 contribution”. So basically I’m told I’m Ok to do this conversion for 2023 up to 6500 but unable to count it as 2022 contributions.
Am I missing something here or should I just call and talk to someone else?
Now you’re not doing a 2023 contribution or a 2022 contribution, you’re doing a Roth conversion and there are no deadlines on that. You can do a conversion of any size at any time. So if someone is telling you that you can’t do a Roth conversion as you describe to me, either they don’t know what they’re talking about or you’re not explaining very well what you’re trying to do.
If you’re getting an error message, you’re probably doing it wrong. I’d call back and talk to someone else and be very clear what you’re trying to do (do a Roth conversion on the $6K in your IRA.)
What if you already filed your tax return for 2021 when you decided to do a backdoor roth conversion for that year, i.e. filed the return early March 2022, but made the contributions in late March of 2022? I understand your forms and was able to figure out how to get TurboTax to use a previous year’s basis to get the conversions to workout, but do I need to do an amended return or fill out another 8606 for 2021? I basically just filled out the 2022 return and 8606 form to indicate that I had additional basis from 2021 or early years.
You really shouldn’t do your taxes until you have everything done for the tax year that affects your taxes. If you do that, you have to file an updated/corrected return, i.e. a 1040X with a new 8606.
Hello! Thank you for all the helpful information on your website and your videos. I may have found a new way to make mistakes on my backdoor contribution and wondered if you had thoughts about the best way to deal with it.
– In 2004, I made a $3000 traditional IRA contribution that was partially deductible. $1190 of the $3000 was not deducted. I don’t believe I filed a Form 8606. I do still have the 2004 Form 5498 to show the $3000 contribution and a copy of my 2004 tax return showing the $1810 IRA deduction.
– In 2020, I made a $6000 non-deductible traditional IRA contribution. I didn’t convert to Roth in 2020. I reported the $6000 nondeductible contribution on a Form 8606 line 1 but I didn’t report total basis in Traditional IRAs of $1190 on line 2. (I reported $0.)
– In 2021, I made a $6000 non-deductible traditional IRA contribution. I didn’t convert to Roth in 2021. I reported the $6000 nondeductible contribution on a Form 8606 line 1 — but I think I misunderstood what was supposed to do on line 2 and didn’t report total basis of $7190 on line 2 (I reported $0).
– In 2022, I made a $6000 non-deductible traditional IRA contribution. I did finally convert all of my traditional IRA accounts to Roth (I had 2 accounts) so my traditional IRA balances were $0 at year-end 2022. As you can imagine the accounts grew a bit from 2004 to 2022 so I have about $10,000 of a taxable amount for my 1040.
I’m trying to figure out how to deal with the error on the Form 8606 in 2020 and 2021. Should I amend my 8606 from 2020 to show a basis of $1190 on line 2, and also amend my 8606 from 2021 to show $7190 basis? Should I forget about trying to include the $1190 as a nondeductible contribution and just use $12,000 (instead of $13,190) as the total basis on line 2 and only amend 2021? Really appreciate it!
You can refile your 2020 taxes with a 1040X and a new 8606. Include a letter about your basis from 2004 and maybe even a copy of part of that tax return for proof. You can do the same for 2021. Thankfully you’ll then have it all cleaned up since you converted it all in 2022.
Hi WCI! First time doing backdoor Roth due to moonlighting income bumping me out of Roth limits. I screwed it up majorly:
-Contributed $1000 to a Roth (mistake #1)
-By the time I recharacterized $1000 Roth to traditional, I lost money and had $800 (mistake #2-not doing changes right away)
-Contributed $3500 more to traditional before December 2022
-Contributed the remaining $1500 to traditional in January 2023 (mistake #3-not contributing everything in 2022)
-Converted all the traditional ($5800 by that point) to Roth in January 2023 (mistake #4-not converting in same calendar year)
1. Based on the IRS guide, it looks like the recharacterized $800 goes on 1044 as a distribution. But does this mean that 8606 line 1 is $5800 or $6000 because of losses during recharacterizing?
2. Would Line 4 would be $1500 because of mistake #3?
1. 6000
2. Yes, $1500
None of this is a huge deal except you’ll be carrying $200 in basis forward each year, perhaps indefinitely.
Thanks! And you’re right, my 2023 will be $200 in line 14 and probably in perpetuity.
Aside from cluttering up the 8606, does the basis matter for tax liability? My initial thought was that it wouldn’t, since the $200 is too small to be reported as a misc itemized deduction anyway.
No. It’s actually an advantage. You know all those people who complain about the $4.37 their $6K that sat in the traditional IRA for 4 days made before they could convert it? You won’t pay tax on that because you’ve got $200 in losses saved up.