Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

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Topic Author
johnsmithsf
Posts: 104
Joined: Sat Jan 14, 2017 2:51 pm

Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by johnsmithsf »

In calendar year 2020, I moved $100,000 from 401k (all pretax) to IRA (preexisting value of IRA $0), then few days later converted $100,000 to Roth IRA. money had grown to $100,010 in the IRA in the mean time, thus $10 remained in the IRA after converting $100,000 to Roth IRA

Later that calendar year 2020, I contributed non-deductible $6,000 to IRA, then next day converted $6,000 to Roth IRA

Thus $10 remained in the IRA on December 31st 2020. Rest $106,000 IN TOTAL was converted to Roth IRA.

I am now confused about line 8 on form 8606. "Enter the net amount you converted from traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2020. Also enter this amount on line 16"

Is it $6000 or $106,000? I am confused as I thought 401k to IRA to Roth conversion doesn't need form 8606



  • 1 Enter your nondeductible contributions to traditional IRAs for 2020, including those made for 2020 from January 1, 2021, through April 15, 2021. See instructions .............$6000


    2Enter your total basis in traditional IRAs. See instructions...............$0


    3Add lines 1 and 2............................$6000

    4Enter those contributions included on line 1 that were made from January 1, 2021, through April 15, 2021.....$0

    5Subtract line 4 from line 3 .........................$6000

    6Enter the value of allyour traditional, SEP, and SIMPLE IRAs as of December 31, 2020, plus any outstanding rollovers.....$10



    7 Enter your distributions from traditional, SEP, and SIMPLE IRAs in 2020. Do not include rollovers (other than repayments of qualified disaster distributions (see 2020 Forms 8915-C, 8915-D, and 8915-E)), qualified charitable distributions, a one-time distribution to fund an HSA, conversions to a Roth IRA, certain returned contributions, or recharacterizations of traditional IRA contributions (see instructions)....................$0

    8 Enter the net amount you converted from traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2020. Also enter this amount on line 16.....
    Is it $6000 or $106,000?
Thanks in advance
nolesrule
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Joined: Thu Feb 26, 2015 10:59 am

Re: Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by nolesrule »

401k to Traditional IRA is just a rollover. Traditional IRA to Roth IRA is an IRA to IRA Roth conversion, and will need to be part of Form 8606.

If you had taken the check from the 401k and put it directly in a Roth IRA then it would not have been part of Form 8606 and instead would have been handled directly on line 5b of the 1040.
ivk5
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Re: Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by ivk5 »

aristotelian wrote: Tue Jun 22, 2021 7:30 amOops!
I don’t understand this comment. Either way moving funds from pretax 401k to Roth was going to be taxable. What’s the oops?

Assuming I intended to convert the 100k, only thing I would have done differently is convert the orphaned $10 too.
aristotelian
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Re: Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by aristotelian »

ivk5 wrote: Tue Jun 22, 2021 7:44 am
aristotelian wrote: Tue Jun 22, 2021 7:30 amOops!
I don’t understand this comment. Either way moving funds from pretax 401k to Roth was going to be taxable. What’s the oops?

Assuming I intended to convert the 100k, only thing I would have done differently is convert the orphaned $10 too.
My impression was you were expecting the conversion to be $6k taxable. If the $106k taxable conversion was intentional, I would also question why you would want to do that all at once.
Topic Author
johnsmithsf
Posts: 104
Joined: Sat Jan 14, 2017 2:51 pm

Re: Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by johnsmithsf »

nolesrule wrote: Tue Jun 22, 2021 7:21 am 401k to Traditional IRA is just a rollover. Traditional IRA to Roth IRA is an IRA to IRA Roth conversion, and will need to be part of Form 8606.

If you had taken the check from the 401k and put it directly in a Roth IRA then it would not have been part of Form 8606 and instead would have been handled directly on line 5b of the 1040.

Hmm.
I will have to check what I have done on 1040.
Always knew that 100k conversion would be taxable. But didn't know where to put it.
I thought line 5b of the 1040 is for either pensions/annuities (2020) or social security (2019) :?:
nolesrule wrote: Tue Jun 22, 2021 7:21 am 401k to Traditional IRA is just a rollover. Traditional IRA to Roth IRA is an IRA to IRA Roth conversion, and will need to be part of Form 8606.
So how do you report both of these steps on 1040 so that you don't get taxed twice.
- 100k rolled over from 401k to Traditional IRA: How to report this on 1040 without getting double taxed
- 100k converted from Traditional IRA to Roth IRA: form 8606 line 4b?
nolesrule
Posts: 2022
Joined: Thu Feb 26, 2015 10:59 am

Re: Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by nolesrule »

johnsmithsf wrote: Tue Jun 22, 2021 9:18 am
nolesrule wrote: Tue Jun 22, 2021 7:21 am 401k to Traditional IRA is just a rollover. Traditional IRA to Roth IRA is an IRA to IRA Roth conversion, and will need to be part of Form 8606.

If you had taken the check from the 401k and put it directly in a Roth IRA then it would not have been part of Form 8606 and instead would have been handled directly on line 5b of the 1040.

Hmm.
I will have to check what I have done on 1040.
Always knew that 100k conversion would be taxable. But didn't know where to put it.
I thought line 5b of the 1040 is for either pensions/annuities (2020) or social security (2019) :?:
nolesrule wrote: Tue Jun 22, 2021 7:21 am 401k to Traditional IRA is just a rollover. Traditional IRA to Roth IRA is an IRA to IRA Roth conversion, and will need to be part of Form 8606.
So how do you report both of these steps on 1040 so that you don't get taxed twice.
- 100k rolled over from 401k to Traditional IRA: How to report this on 1040 without getting double taxed
- 100k converted from Traditional IRA to Roth IRA: form 8606 line 4b?
Line 5 includes any distributions from 401k. If it's a rollover to an IRA, the amount of the rollover goes in 5a. If entered correctly in tax software, you'll see ROLLOVER in 5b. if any part of the rollover is taxable such as the conversion, then the taxable amount goes in 5b.

In your case you'd have $100k on line 5a (from 1099-R) and ROLLOVER in 5b to designate that none of it was a conversion from the 401k.

On form 8606 you'd include all amounts from TIRA to Roth IRA converted in Line 8. If there was any after-tax basis in the amount rolled over from the 401k, it would go on Line 2 of the 8606. If you follow all form 8606 instructions for every step correctly, the numbers work out.

On 1040 4a would have the total amount distributed from IRAs (from 1099-R) and 4b would come from the calculations on Form 8606.


Yes, 4a and 5a can be pretty inflated compared to actual dollars if you move money more than once between accounts, because all the moves get added together (for each line 4 type or for each line 5 type). 4b and 5b are for specifying how much of the money moves are taxable.
Topic Author
johnsmithsf
Posts: 104
Joined: Sat Jan 14, 2017 2:51 pm

Re: Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by johnsmithsf »

nolesrule wrote: Tue Jun 22, 2021 9:55 am
johnsmithsf wrote: Tue Jun 22, 2021 9:18 am
nolesrule wrote: Tue Jun 22, 2021 7:21 am 401k to Traditional IRA is just a rollover. Traditional IRA to Roth IRA is an IRA to IRA Roth conversion, and will need to be part of Form 8606.

If you had taken the check from the 401k and put it directly in a Roth IRA then it would not have been part of Form 8606 and instead would have been handled directly on line 5b of the 1040.

Hmm.
I will have to check what I have done on 1040.
Always knew that 100k conversion would be taxable. But didn't know where to put it.
I thought line 5b of the 1040 is for either pensions/annuities (2020) or social security (2019) :?:
nolesrule wrote: Tue Jun 22, 2021 7:21 am 401k to Traditional IRA is just a rollover. Traditional IRA to Roth IRA is an IRA to IRA Roth conversion, and will need to be part of Form 8606.
So how do you report both of these steps on 1040 so that you don't get taxed twice.
- 100k rolled over from 401k to Traditional IRA: How to report this on 1040 without getting double taxed
- 100k converted from Traditional IRA to Roth IRA: form 8606 line 4b?
Line 5 includes any distributions from 401k. If it's a rollover to an IRA, the amount of the rollover goes in 5a. If entered correctly in tax software, you'll see ROLLOVER in 5b. if any part of the rollover is taxable such as the conversion, then the taxable amount goes in 5b.

In your case you'd have $100k on line 5a (from 1099-R) and ROLLOVER in 5b to designate that none of it was a conversion from the 401k.

On form 8606 you'd include all amounts from TIRA to Roth IRA converted in Line 8. If there was any after-tax basis in the amount rolled over from the 401k, it would go on Line 2 of the 8606. If you follow all form 8606 instructions for every step correctly, the numbers work out.

On 1040 4a would have the total amount distributed from IRAs (from 1099-R) and 4b would come from the calculations on Form 8606.


Yes, 4a and 5a can be pretty inflated compared to actual dollars if you move money more than once between accounts, because all the moves get added together (for each line 4 type or for each line 5 type). 4b and 5b are for specifying how much of the money moves are taxable.
Just to double check on 1040 form,
Rollover from 401k to IRA will be reported on the "pension and annuities" line (a: 100k, b: Taxable amount "Rollover" 0)
And conversion of IRA to Roth will be reported on the "IRA distributions" line. (a: 106k, b: 100k)

Thanks a lot for your help. Sorry for the multiple questions as IRS has changed 1040 forms in the recent years and even 2019 and 2020 forms don't match so wanted to make sure that we were talking about the same thing and also the label of "pension and annuities" makes things confusing as well.
nolesrule
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Joined: Thu Feb 26, 2015 10:59 am

Re: Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by nolesrule »

Yes, that is correct. Are you using tax software or filling out the forms manually? With tax software, entering the 1099s and answering the questions correctly will get everything in the right place.
Topic Author
johnsmithsf
Posts: 104
Joined: Sat Jan 14, 2017 2:51 pm

Re: Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by johnsmithsf »

nolesrule wrote: Tue Jun 22, 2021 12:16 pm Yes, that is correct. Are you using tax software or filling out the forms manually? With tax software, entering the 1099s and answering the questions correctly will get everything in the right place.
Trying to file a paper amendment to undo prior mistakes in tax software :D
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Duckie
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Re: Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by Duckie »

johnsmithsf wrote: Tue Jun 22, 2021 1:02 am In calendar year 2020, I moved $100,000 from 401k (all pretax) to IRA (preexisting value of IRA $0), then few days later converted $100,000 to Roth IRA. money had grown to $100,010 in the IRA in the mean time, thus $10 remained in the IRA after converting $100,000 to Roth IRA
You should have converted the $10 at the same time. Convert 100% of the TIRA to avoid having anything other than "0" on line 6.
Topic Author
johnsmithsf
Posts: 104
Joined: Sat Jan 14, 2017 2:51 pm

Re: Form 8606. Did both Backdoor Roth and also additionally did 401k to IRA and then to Roth conversion

Post by johnsmithsf »

Duckie wrote: Tue Jun 22, 2021 4:10 pm
johnsmithsf wrote: Tue Jun 22, 2021 1:02 am In calendar year 2020, I moved $100,000 from 401k (all pretax) to IRA (preexisting value of IRA $0), then few days later converted $100,000 to Roth IRA. money had grown to $100,010 in the IRA in the mean time, thus $10 remained in the IRA after converting $100,000 to Roth IRA
You should have converted the $10 at the same time. Convert 100% of the TIRA to avoid having anything other than "0" on line 6.
Yeah. Learned my lesson the hard way.
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