Roth IRA Phaseout?

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investor1
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Joined: Thu Mar 15, 2012 8:15 pm

Roth IRA Phaseout?

Post by investor1 » Thu Jan 10, 2019 1:55 pm

Hey, I think my mAGI for 2018 is going to be in or above the phaseout for a Roth IRA. I fully funded my Roth IRA last year since I didn't expect to be in the phaseout.

My understanding is that I can recharacterize my contributions into a traditional IRA, then convert them back into my Roth IRA. Is this still the case? I'm unsure given the changes made in 2018.

I don't currently have a tIRA, so no worries about existing holdings there.

krow36
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Location: WA

Re: Roth IRA Phaseout?

Post by krow36 » Thu Jan 10, 2019 2:09 pm

It's still the case. Be sure and fill out the Form 8606 for 2018 which will track the contribution and its 2018 gains. Next year's Form 8606 will report the conversion.

Topic Author
investor1
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Re: Roth IRA Phaseout?

Post by investor1 » Thu Jan 10, 2019 2:40 pm

Thanks!

Is that a typo? It looks like you referenced the same form for 2018 and beyond 2018.

krow36
Posts: 2019
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Location: WA

Re: Roth IRA Phaseout?

Post by krow36 » Thu Jan 10, 2019 3:12 pm

I could have been clearer. You need to report the contribution you made in 2018 on the 2018 Form 8606. That form will also ask for the balance on Dec 31, 2018. The conversion in 2019 will be reported on a 2019 Form 8606, and sent in with your 2019 tax return in 2020. I believe that a note explaining what you did should also be included?

Be sure and study the Form 8606 directions and ask questions if you need to. There are lots of good aids for filling out the form, although mistakes are often reported. Google "Backdoor Roth" and white coat investor or tbf or the BH Wiki.

Jack FFR1846
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Re: Roth IRA Phaseout?

Post by Jack FFR1846 » Thu Jan 10, 2019 3:28 pm

Would this have a wrench thrown in if the OP has.....say a million dollars in a tIRA?

That was our case for 2017 and we hit the phase out range and did a withdrawal of excess contributions with the help of Fidelity and Schwab and our tax preparers. For 2018, I made no Roth contributions and won't until our tax preparer tells us what that contribution can be.
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Earl Lemongrab
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Re: Roth IRA Phaseout?

Post by Earl Lemongrab » Thu Jan 10, 2019 3:35 pm

Jack FFR1846 wrote:
Thu Jan 10, 2019 3:28 pm
Would this have a wrench thrown in if the OP has.....say a million dollars in a tIRA?
OP stated:
I don't currently have a tIRA, so no worries about existing holdings there.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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samsoes
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Re: Roth IRA Phaseout?

Post by samsoes » Thu Jan 10, 2019 3:57 pm

Jack FFR1846 wrote:
Thu Jan 10, 2019 3:28 pm
Would this have a wrench thrown in if the OP has.....say a million dollars in a tIRA?
To answer your question, yes there would be quite a large wrench in such a hypothetical case. Taxes on the subsequent Roth Conversion would be prorated based on the mix of funds in the TIRA.

1M in pretax TIRA funds; 5.5k post-tax being converted = (1 - (5500/1,005,500)) = the conversion is 99.45% taxable ($5470 taxable income)
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Topic Author
investor1
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Re: Roth IRA Phaseout?

Post by investor1 » Thu Jan 10, 2019 4:43 pm

krow36 wrote:
Thu Jan 10, 2019 3:12 pm
I could have been clearer. You need to report the contribution you made in 2018 on the 2018 Form 8606. That form will also ask for the balance on Dec 31, 2018. The conversion in 2019 will be reported on a 2019 Form 8606, and sent in with your 2019 tax return in 2020. I believe that a note explaining what you did should also be included?

Be sure and study the Form 8606 directions and ask questions if you need to. There are lots of good aids for filling out the form, although mistakes are often reported. Google "Backdoor Roth" and white coat investor or tbf or the BH Wiki.
That makes sense. Thanks again!

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