Backdoor roth timing

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rickberg
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Joined: Tue Sep 09, 2014 7:36 pm

Backdoor roth timing

Post by rickberg » Wed Dec 21, 2016 2:23 pm

Due to some delays in account opening, it appears that Vanguard will not be able to open my Traditional IRA account in time. Is it possible to fund my Traditional IRA in 2017 for 2016 and perform the conversion to a Roth IRA in 2017 for 2016? Or does this have to be done in this calendar year?

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Epsilon Delta
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Re: Backdoor roth timing

Post by Epsilon Delta » Wed Dec 21, 2016 2:38 pm

rickberg wrote:Due to some delays in account opening, it appears that Vanguard will not be able to open my Traditional IRA account in time. Is it possible to fund my Traditional IRA in 2017 for 2016 and perform the conversion to a Roth IRA in 2017 for 2016? Or does this have to be done in this calendar year?
It is possible to fund a traditional IRA for 2016 until April 18, 2017.
But a conversion cannot be done retroactively. It is taxed in the year the funds are withdrawn from the traditional IRA, which in this case will be 2017.

However if the other conditions are meet (mostly no other traditional IRA on Dec 31 2017) the conversion of a non-deducible contribution is not taxed so it does not matter that the conversion is in 2017. It does require you to remember what you did for reporting on your 2017 return and most importantly you must refrain for rolling a 401(k) or similar to an IRA in 2017.

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Earl Lemongrab
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Re: Backdoor roth timing

Post by Earl Lemongrab » Wed Dec 21, 2016 4:24 pm

What kind of "delays"? Every time I have opened in IRA online it's been essentially instantaneous, even at Vanguard. Not being able to get it opened by the end of the year would be intolerable, and you should use another custodian with better service.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

rickberg
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Re: Backdoor roth timing

Post by rickberg » Wed Mar 08, 2017 4:38 pm

In 2017, I converted my money from a Traditional IRA to a Roth IRA for 2016 and 2017. Do I need to file a 8606 in my 2016 tax returns or do I do this in my 2017 tax returns?

retiredjg
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Re: Backdoor roth timing

Post by retiredjg » Wed Mar 08, 2017 4:43 pm

The 2016 contribution goes on the 2016 Form 8606 and is filed with the 2016 taxes.

The 2017 contribution goes on the 2017 Form 8606 a year from now. The conversion was done in 2017 so it also goes on the 2017 Form 8606 a year from now.

rickberg
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Re: Backdoor roth timing

Post by rickberg » Wed Mar 08, 2017 4:48 pm

retiredjg wrote:The 2016 contribution goes on the 2016 Form 8606 and is filed with the 2016 taxes.

The 2017 contribution goes on the 2017 Form 8606 a year from now. The conversion was done in 2017 so it also goes on the 2017 Form 8606 a year from now.

Thanks for the feedback - to confirm, even though I did my conversion for 2016 in 2017, I will need to file the 2016 Form 8606 with my 2016 taxes?

retiredjg
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Re: Backdoor roth timing

Post by retiredjg » Wed Mar 08, 2017 5:04 pm

Yes.

The contribution is one step. It is filed with the taxes for the year that the contribution is for.

The conversion is a second step. It is filed with the taxes for the year in which it occurred.

If you have already filed your taxes for 2016, you can generate and send in the Form 8606 as a stand alone form. It merely records your non-deductible contribution. It does not change your taxes.

Alto Astral
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Re: Backdoor roth timing

Post by Alto Astral » Wed Mar 08, 2017 10:51 pm

rickberg wrote:
retiredjg wrote:The 2016 contribution goes on the 2016 Form 8606 and is filed with the 2016 taxes.

The 2017 contribution goes on the 2017 Form 8606 a year from now. The conversion was done in 2017 so it also goes on the 2017 Form 8606 a year from now.

Thanks for the feedback - to confirm, even though I did my conversion for 2016 in 2017, I will need to file the 2016 Form 8606 with my 2016 taxes?
Yes. I just did it a couple of days back. Your 2016 would look like this: viewtopic.php?p=3263944#p3234703

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