First time backdoor Roth Conversion. form 8606 help

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renn20
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First time backdoor Roth Conversion. form 8606 help

Post by renn20 » Fri Apr 20, 2018 4:15 pm

Hi,
Earlier last year, I had some trouble with my commingled ira fund and the forum had provided great help. I was able to get my basis corrected. 2017 was my first year making backdoor conversion to roth. I want to make sure that I am filling out the 8606 form correctly. I have attached the screenshot with numbers. Could you please review to see if i have made any mistakes? Thanks in advance.


EDIt with more info.

I had 21770.68 in TIRA as of end of 2016.
Converted 21770.68 in April 2017.
As of Dec 31, 2017, my tira balance was 5,875.34. Contributed $5500 in 2017

Currently, my Tira has $5,889.48 from 2017 contribution and gains.


Image
Last edited by renn20 on Tue Apr 24, 2018 12:41 am, edited 5 times in total.

retiredjg
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Re: First time backdoor Roth Converion. form 8606 help

Post by retiredjg » Fri Apr 20, 2018 4:24 pm

It might reflect what you did, but it does not make sense to me.

Where did the 21,770.68 come from on line 2?

Tell us what date you did your contribution and your conversion. Why did you convert only 21,770.68 instead of the whole thing?

retiredjg
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Re: First time backdoor Roth Converion. form 8606 help

Post by retiredjg » Fri Apr 20, 2018 4:28 pm

It appears that you have line 10 incorrect. But again, tell us what you did and when you did it. Also, what is in the IRA right now?

renn20
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Re: First time backdoor Roth Converion. form 8606 help

Post by renn20 » Fri Apr 20, 2018 4:34 pm

line 2 is my basis as of 2016. reported to IRS

The conversion was done in April 2017.

and I forgot to convert my 2017 contributions. Will have convert them a long with 2018 contribution at year end this year.
Last edited by renn20 on Fri Apr 20, 2018 4:54 pm, edited 2 times in total.

retiredjg
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Re: First time backdoor Roth Converion. form 8606 help

Post by retiredjg » Fri Apr 20, 2018 4:47 pm

renn20 wrote:
Fri Apr 20, 2018 4:34 pm
line 2 is my basis as of 2016. that's What's in IRA now
Which IRA?

When did you make the 2017 contribution?

renn20
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Re: First time backdoor Roth Converion. form 8606 help

Post by renn20 » Fri Apr 20, 2018 4:50 pm

retiredjg wrote:
Fri Apr 20, 2018 4:47 pm
renn20 wrote:
Fri Apr 20, 2018 4:34 pm
line 2 is my basis as of 2016. that's What's in IRA now
Which IRA?

When did you make the 2017 contribution?
I meant to say that's what's reported to IRS. My TIRA only has 2017 contribution now.

I made monthly contribution in 2017. over 12 months period

retiredjg
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Re: First time backdoor Roth Converion. form 8606 help

Post by retiredjg » Fri Apr 20, 2018 4:59 pm

renn20 wrote:
Fri Apr 20, 2018 4:50 pm
retiredjg wrote:
Fri Apr 20, 2018 4:47 pm
renn20 wrote:
Fri Apr 20, 2018 4:34 pm
line 2 is my basis as of 2016. that's What's in IRA now
Which IRA?

When did you make the 2017 contribution?
I meant to say that's what's reported to IRS. My TIRA only has 2017 contribution now.

I made monthly contribution in 2017. over 12 months period
If you made monthly contributions in 2017 over a full 12 months, how did you do a Roth conversion on it in April 2017?

Disregard that question. I think what you are saying is that you converted everything else in April 2017 but did not convert any of the 2017 contributions.

How did the amount on your 2016 Form 8606 line 14 not grow or shrink any before you converted it to Roth 4 months later?

Exactly what is in your tIRA today? It is unlikely to be exactly $5,500.

FactualFran
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Re: First time backdoor Roth Conversion. form 8606 help

Post by FactualFran » Fri Apr 20, 2018 5:11 pm

The values on Form 8606 corresponds to the situation where
  • you made $5,500 of non-deductible contribution in 2017
  • you made a total of $21,770.68 non-deductible contributions prior to 2017
  • in 2017 you did a Roth conversion of $21,770.68 and that was the entire balance, in other words the IRA has a cumulative loss of $5,500

renn20
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Re: First time backdoor Roth Converion. form 8606 help

Post by renn20 » Fri Apr 20, 2018 5:32 pm

retiredjg wrote:
Fri Apr 20, 2018 4:59 pm
renn20 wrote:
Fri Apr 20, 2018 4:50 pm
retiredjg wrote:
Fri Apr 20, 2018 4:47 pm
renn20 wrote:
Fri Apr 20, 2018 4:34 pm
line 2 is my basis as of 2016. that's What's in IRA now
Which IRA?

When did you make the 2017 contribution?
I meant to say that's what's reported to IRS. My TIRA only has 2017 contribution now.

I made monthly contribution in 2017. over 12 months period
If you made monthly contributions in 2017 over a full 12 months, how did you do a Roth conversion on it in April 2017?

Disregard that question. I think what you are saying is that you converted everything else in April 2017 but did not convert any of the 2017 contributions.

How did the amount on your 2016 Form 8606 line 14 not grow or shrink any before you converted it to Roth 4 months later?

Exactly what is in your tIRA today? It is unlikely to be exactly $5,500.

You are correct. I kept thinking the 5500 the contribution number only. exact number is 5,914.34 in the TIRA account.

the converted amount was parked in money market fund

nolesrule
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Re: First time backdoor Roth Conversion. form 8606 help

Post by nolesrule » Fri Apr 20, 2018 8:43 pm

What was the balance of your TIRA on December 31? Based on your entries in Lines 1 and 4, it cannot have been zero.

retiredjg
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Re: First time backdoor Roth Conversion. form 8606 help

Post by retiredjg » Sat Apr 21, 2018 7:26 am

Here's how it looks to me.

Line 1 - 5500 seems correct

Line 2 - 21770.68 is correct only if that is what was on line 14 of your last Form 8606 (which was probably 2016)



Line 6 should not be 0 because you had money in the IRA at the end of 2017 - probably something near but not exactly 5500

Line 8 is correct if 21770.68 is what was reported on a 1099 form; however, it seems odd that that account did not grow even a few dollars in the 4 months between the end of the year and when you did the conversion. Did you convert a specific amount or the entire account?

Lines 9 - 14 will change because of the change in line 6

Line 16 is correct if that is what was reported on the 1099 form

Line 17 will change because of the change in line 6

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FiveK
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Re: First time backdoor Roth Converion. form 8606 help

Post by FiveK » Sat Apr 21, 2018 9:39 pm

renn20 wrote:
Fri Apr 20, 2018 5:32 pm
exact number is 5,914.34 in the TIRA account.
If this is correct:
Image
then it seems $326 of your conversion was taxable for 2017, and your basis in the tIRA is now $5826.

Does that look correct to you?

retiredjg
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Re: First time backdoor Roth Conversion. form 8606 help

Post by retiredjg » Sun Apr 22, 2018 5:33 am

I think that 5914.34 is the current balance, not end of last year.

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FiveK
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Re: First time backdoor Roth Conversion. form 8606 help

Post by FiveK » Sun Apr 22, 2018 11:39 am

retiredjg wrote:
Sun Apr 22, 2018 5:33 am
I think that 5914.34 is the current balance, not end of last year.
Very possible, thus the word "if"....

renn20
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Re: First time backdoor Roth Conversion. form 8606 help

Post by renn20 » Mon Apr 23, 2018 9:06 pm

It sounds like I have made a mistake on line 6.

What info can I provide to make it easier for you guys to help me out? I am definitely confusing you guys on this.

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FiveK
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Re: First time backdoor Roth Conversion. form 8606 help

Post by FiveK » Mon Apr 23, 2018 9:20 pm

renn20 wrote:
Mon Apr 23, 2018 9:06 pm
It sounds like I have made a mistake on line 6.

What info can I provide to make it easier for you guys to help me out? I am definitely confusing you guys on this.
You could work with the 'Form8606' tab in the personal finance toolbox spreadsheet (if you don't mind spreadsheets) and compare what you get there with whatever method you are using to generate the "official" Form 8606. Sometimes looking from a different perspective is helpful - the final numbers should be same, no matter which route one uses....

At the very least, the total balance in all traditional IRAs (regardless of how much is contribution and how much is gain) on 31-Dec-2017 is needed.

renn20
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Re: First time backdoor Roth Conversion. form 8606 help

Post by renn20 » Tue Apr 24, 2018 12:41 am

I had 21770.68 in TIRA as of end of 2016.
Converted 21770.68 in April 2017.
As of Dec 31, 2017, my tira balance was 5,875.34. Contributed $5500 in 2017
Currently, my Tira has $5,889.48 from 2017 contribution and gains.

ivk5
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Re: First time backdoor Roth Conversion. form 8606 help

Post by ivk5 » Tue Apr 24, 2018 3:36 am

I haven't seen the 2016 Form 8606 in this thread. Can you post a snapshot of that as well? Since you've had to correct/clarify some of the info provided already, it seems you may still not fully understand the questions being asked (in thread or on form) or what you've done. For example, you may still be confusing balance ("I had 21770.68 in TIRA as of end of 2016") and basis ("line 2 is my basis as of 2016. reported to IRS"), which I see looking back at the prior thread is a recurring issue. That's perfectly fine, that's why you asked for help to straighten it out - just want to make sure we advise based on the right info.

Assuming basis is correct, Line 6 (or equivalent in Worksheet 1-1) should be 5875.34. Taxable amount (Line 18) is 295.57 and new basis (Line 14) is 5796, which will go on Line 2 of your 2018 Form 8606. The spreadsheet FiveK pointed you is worth a look.

Edited to add:

It's still important to confirm retiredjg's point about confirming that 21770.68 matches the conversion amount reported on the 1099-R you should have received.
retiredjg wrote:
Sat Apr 21, 2018 7:26 am
Line 8 is correct if 21770.68 is what was reported on a 1099 form; however, it seems odd that that account did not grow even a few dollars in the 4 months between the end of the year and when you did the conversion. Did you convert a specific amount or the entire account?
And a separate point, just to be sure- make sure that Line 15 on your 1040 correctly reports the rollover to your 401k, for which you should also have received a (separate) 1099-R, in addition to the amounts from 8606. My tax preparer would include a statement itemizing the gross and taxable amounts amounts pulled over from 8606 as well as the 1099 for the rollover, for matching purposes.

retiredjg
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Re: First time backdoor Roth Conversion. form 8606 help

Post by retiredjg » Tue Apr 24, 2018 7:06 am

renn20 wrote:
Mon Apr 23, 2018 9:06 pm
What info can I provide to make it easier for you guys to help me out? I am definitely confusing you guys on this.
1) When you finished doing all the Forms 8606 last year, what was on line 14 on the 2016 Form 8606?

2) What does the 1099R you received early this year say that you converted to Roth?

3) How many dollars were in your IRA at the end of 2017?

I too think you may be confusing "balance" with "basis". Balance refers to the amount of money you have in an account. Basis refers to money that you have already paid tax on. In this case, the basis we are looking for should be on line 14 of the 2016 Form 8606.

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FiveK
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Re: First time backdoor Roth Conversion. form 8606 help

Post by FiveK » Tue Apr 24, 2018 11:03 am

Based on the Need help with IRA, Roth IRA situation, Commingled funds thread, it's possible the 21770.68 was both the basis and balance of the tIRA on 31-Dec-2016, that $5500 non-deductible was contributed in 2017, and the tIRA balance on Dec 31, 2017 was 5,875.34.

If so, $296 was taxable in 2017, and the remaining basis is $5796. But if the 31-Dec-2016 basis was less than the 21770.68 balance, a higher amount was taxable in 2017 and the remaining basis is lower.

renn20
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Re: First time backdoor Roth Conversion. form 8606 help

Post by renn20 » Tue Apr 24, 2018 11:53 am

1) When you finished doing all the Forms 8606 last year, what was on line 14 on the 2016 Form 8606?
I just went thru my statements, I started contributing to Tira in 2013. Here's what the contribution looks like(exactly as it appears on the year contribution box for each year)
2013: 5270.68
2014: 5500
2015: 5500
2016: 5500
2017: 5500

2016 8606 form snapshot
Image



2) What does the 1099R you received early this year say that you converted to Roth?
here's the 1099-r. snapshot
first line is rollover to employer 401k. second line is roth conversion
Image

3) How many dollars were in your IRA at the end of 2017?
$5,875.34

And a separate point, just to be sure- make sure that Line 15 on your 1040 correctly reports the rollover to your 401k, for which you should also have received a (separate) 1099-R, in addition to the amounts from 8606. My tax preparer would include a statement itemizing the gross and taxable amounts amounts pulled over from 8606 as well as the 1099 for the rollover, for matching purposes.
please see the 1099-r snapshot. I am doing this for the same purpose as you have done. Want to make sure my tax preparer understands what I have done. Already filed extension because of this.

snapshot... 1040 line 15
Image

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FiveK
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Re: First time backdoor Roth Conversion. form 8606 help

Post by FiveK » Tue Apr 24, 2018 12:31 pm

Does your 2017 Form 8606 have either the following numbers, or blank for lines 6-12 but with the same numbers on the other lines? Or perhaps $295 taxable instead of $296 (could differ due to rounding)?
Image
If so, you are probably all set on Form 8606.

The Form 1040 line 15 should have the total of all IRA distributions from all forms 1099-R in box 15a: 53,649. See instructions for Lines 15a and 15b. Box 15b should have the taxable part of the backdoor Roth: $295 or $296.

ivk5
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Re: First time backdoor Roth Conversion. form 8606 help

Post by ivk5 » Tue Apr 24, 2018 4:29 pm

FiveK wrote:
Tue Apr 24, 2018 12:31 pm
The Form 1040 line 15 should have the total of all IRA distributions from all forms 1099-R in box 15a: 53,649. See instructions for Lines 15a and 15b. Box 15b should have the taxable part of the backdoor Roth: $295 or $296.
+1

retiredjg
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Re: First time backdoor Roth Conversion. form 8606 help

Post by retiredjg » Sun Apr 29, 2018 2:31 pm

renn20, I'm sorry for the delay. My bookmark to your thread fell through the cracks. :oops:

With the information you last gave us, I come up with the same thing that FiveK got using the spreadsheet.

$295.57 is taxable for year 2017 (needs to be added to your pending tax 2017 return or to an amended return if you already sent it in wrong)

$5795.57 is your basis to carry over into 2018 - to be applied against your conversion which you plan to do in year 2018. Go ahead and convert the entire IRA. You will pay tax on the few dollars the account has grown. In the future, your Forms 8606 will be very simple if you do your contribution and the conversion in the same calendar year, preferably only a day or so apart.

If you are getting something different from what is show above, maybe we can help you figure out where the problem is. If you are doing this with tax software instead of by hand, you may not have anything on links 6 - 12. Don't worry about that if the other numbers are right.

Good luck with all this!

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