$4 in IRA - how to clear it out so I can do backdoor Roth conversions?

[backdoorRoth]

Somehow there is $4.14 sitting in my IRA at Fidelity. I want to get the IRA back to zero to simplify my annual backdoor Roth conversions. I was going to just withdraw the $4 and pay taxes/penalty on it, but Fidelity has a $10 minimum for transferring to another bank or cutting a check. Should I figure out how to transfer the money from the IRA to a Roth IRA?

[Uniballer]

Just convert it when you do your backdoor conversion. How much tax will you pay on $4? If it was a million then it would be different.

[Millennial]

Just leave it there and do the backdoor - including this $4 in the conversion. You might end up paying $1 of tax, but the tax forms aren't complicated. Then it'll be gone forever.

[ipdiddly]

Your problem is fairly typical as inevitably an IRA may have some leftover cash in it (e.g. because of a few days or weeks of interest). There is no need to clear out the $4 preemptively. Just make your usual non-deductible IRA contribution (say $6000), then simply convert the full $6004 to Roth. When you do your taxes, assuming the $4 represents gains in the IRA, you will simply pay taxes on the $4. In other words, your 1099 will show $6004 of reportable distribution, but $6000 of that will be basis that is subtracted out on your 8606.

[backdoorRoth]

I should clarify -- the $4 is in a Fidelity account, which I don't use. I do my backdoor Roth conversations each year in my Vanguard accounts.

For some reason everything I try to do online with the $4 -- withdraw, contribute to the (empty) Roth I have at Fidelity, convert the IRA to Roth -- all keeps taking me to a page that will only let me select an external bank account to move the money to. Not sure what's going on.

[SS Rambo]

Then convert it to a fidelity Roth. Or roll it over to the vanguard IRA. Or yes, pull it out and pay the penalty but that seems like a blemish that could be avoided but digitally submitting a transfer (or conversion) form at Fidelity then being done with it. Good luck, congrats on the Roth money!

[Uniballer]

One approach: contribute $1000 of your backdoor money to the Fidelity IRA, then transfer that whole account to Vanguard. Then contribute the rest at Vanguard and convert it all...

[HomeStretch]

Call Fidelity to have a rep help you. Call wait times have been reasonable for me in recent weeks.

[life in slices]

IMO just cash it out and close the account if you want - its only $4 - even if you have to pay fees and taxes, it is only $4
Everything else takes more time and your time is probably more valuable than the $4

[aristotelian]

If you can't figure out how to remove it, you can always just do the pro rata calculation. Your $6000 conversion would be 99.93% nontaxable.

[backdoorRoth]

Ok, I finally got Fidelity to just withdraw the $4 and send it to my regular bank account. How do I account for this on my tax return? I believe it was earnings from a nondeductible IRA contribution. Do I deal with it when I file 2021 taxes next year? Is it just a typical early IRA withdrawal so it will have the penalty? I don't really care since it's just $4 - just want to know how to file it property for Uncle Sam.

[livesoft]

Fidelity will send you a 1099-R for the withdrawal and you will enter that 1099-R into your tax prep software.

BTW, you can also put $4 into another IRA within 60 days and you will have an indirect rollover. https://www.irs.gov/retirement-plans/pl ... tributions

[123]

Ok, I finally got Fidelity to just withdraw the $4 and send it to my regular bank account. How do I account for this on my tax return? I believe it was earnings from a nondeductible IRA contribution. Do I deal with it when I file 2021 taxes next year? Is it just a typical early IRA withdrawal so it will have the penalty? I don't really care since it's just $4 - just want to know how to file it property for Uncle Sam.

Fidelity will send you a 1099-R after 2021 is over. If you're under 59 1/2 a tax penalty would apply. Tax software will be able to handle it as a routine matter, as will paper tax forms if you use those.

[Wiggums]

Fidelity will send you a 1099-R for the withdrawal and you will enter that 1099-R into your tax prep software.

BTW, you can also put $4 into another IRA within 60 days and you will have an indirect rollover. https://www.irs.gov/retirement-plans/pl ... tributions

+1

[David Jay]

If you're under 59 1/2 a tax penalty would apply.

Oh, no! Another 41 cents of tax penalty.