Form 8606 - Backdoor Roth IRA

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jgreenb1
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Joined: Sat Mar 18, 2017 12:17 am

Form 8606 - Backdoor Roth IRA

Postby jgreenb1 » Sat Mar 18, 2017 12:22 am

I am planning on contributing $5.5K to a traditional IRA and then converting to a Roth IRA. My wife will do the same process. We are filing our taxes as married filing jointly - do we need to fill out two separate 8606 forms or should we combine our contributions into one 8606 form?

Thanks!

kaneohe
Posts: 3990
Joined: Mon Sep 22, 2008 12:38 pm

Re: Form 8606 - Backdoor Roth IRA

Postby kaneohe » Sat Mar 18, 2017 8:21 am

https://www.irs.gov/pub/irs-pdf/f8606.pdf

Check out the form and then give us the answer. Hint: don't read too far too fast :happy

jgreenb1
Posts: 2
Joined: Sat Mar 18, 2017 12:17 am

Re: Form 8606 - Backdoor Roth IRA

Postby jgreenb1 » Sat Mar 18, 2017 1:35 pm

Two separate forms. Not sure how I missed that the first time through. Thanks!

DSInvestor
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Joined: Sat Oct 04, 2008 11:42 am

Re: Form 8606 - Backdoor Roth IRA

Postby DSInvestor » Sat Mar 18, 2017 1:47 pm

If you're contributing to Traditional IRA for 2016, your 2016 8606 will only show the contribution for 2016. Assuming you did not do any conversions in calendar 2016, the IRA basis (non-deductible contribution) added for tax year 2016 will carryforward from line 14 to the 2017 8606 form line 2.

The conversion done in calendar 2017 will be handled by the 2017 8606 form. If you have sufficient cash, I suggest also contributing for 2017 tax year and converting it all to Roth IRA. This way you add $5500 basis for 2016, $5500 basis for 2017 and then convert all 11K to Roth IRA before DEC 31, 2017. This consumes all of your IRA basis and there will be nothing to carry forward to 2018. You start 2018 with a clean slate.

If you do not have another 11K available now to make the 2017 contributions, you can make them later in the year making sure to complete the 2017 contribution and conversion before DEC 31, 2017. Your IRA custodian will aggregate both Roth conversions in your 1009-R tax slip.

Are you preparing your tax returns on paper or using tax software? If using tax software, you should enter your 2016 Traditional IRA contributions. The software will examine your tax situation and if those contributions are non-deductible (due to coverage by employer plan and high income), form 8606 will be added to track the IRA basis.

dangling
Posts: 18
Joined: Fri Apr 03, 2015 4:21 am

Re: Form 8606 - Backdoor Roth IRA

Postby dangling » Sun Mar 19, 2017 6:25 pm

DSInvestor wrote:If you're contributing to Traditional IRA for 2016, your 2016 8606 will only show the contribution for 2016. Assuming you did not do any conversions in calendar 2016, the IRA basis (non-deductible contribution) added for tax year 2016 will carryforward from line 14 to the 2017 8606 form line 2.

The conversion done in calendar 2017 will be handled by the 2017 8606 form. If you have sufficient cash, I suggest also contributing for 2017 tax year and converting it all to Roth IRA. This way you add $5500 basis for 2016, $5500 basis for 2017 and then convert all 11K to Roth IRA before DEC 31, 2017. This consumes all of your IRA basis and there will be nothing to carry forward to 2018. You start 2018 with a clean slate.

If you do not have another 11K available now to make the 2017 contributions, you can make them later in the year making sure to complete the 2017 contribution and conversion before DEC 31, 2017. Your IRA custodian will aggregate both Roth conversions in your 1009-R tax slip.

Are you preparing your tax returns on paper or using tax software? If using tax software, you should enter your 2016 Traditional IRA contributions. The software will examine your tax situation and if those contributions are non-deductible (due to coverage by employer plan and high income), form 8606 will be added to track the IRA basis.


Sorry for getting in here - but similar situation.

So if I am doing 2016 TIRA contribution now (before april 15th, 2017) and backrothing it roll over to Roth now, you are saying that no form 8606 for 2016 tax filing? only mention TIRA contribution in TaxAct software (which is what I am using). and because this was done in 2017 - form 8606 will go with 2017 tax returns? And then you are saying to do 2017 backroths before Dec 31st, 2017 so both 2016/2017 are done on one form 8606 with 2017 tax return? (note: this is the first time I am doing backdoor roth - so no "basis" I guess for 2015)

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Duckie
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Joined: Thu Mar 08, 2007 2:55 pm

Re: Form 8606 - Backdoor Roth IRA

Postby Duckie » Sun Mar 19, 2017 6:56 pm

dangling wrote:So if I am doing 2016 TIRA contribution now (before april 15th, 2017) and backrothing it roll over to Roth now, you are saying that no form 8606 for 2016 tax filing? only mention TIRA contribution in TaxAct software (which is what I am using).

When you tell your software you made a contribution to the TIRA for 2016 you also tell it that the contribution was non-deductible. That will trigger a 2016 Form 8606 to track the non-deductible basis.

and because this was done in 2017 - form 8606 will go with 2017 tax returns?

The conversion done in 2017 will go on the 2017 Form 8606.

And then you are saying to do 2017 backroths before Dec 31st, 2017 so both 2016/2017 are done on one form 8606 with 2017 tax return?

If you contribute for 2017 in 2017 and convert that contribution in 2017 both actions will go on the 2017 Form 8606.

Here's a cheat sheet for contributions/conversions over a two-year period. Just replace year 2015 with 2016 and year 2016 with 2017.

dangling
Posts: 18
Joined: Fri Apr 03, 2015 4:21 am

Re: Form 8606 - Backdoor Roth IRA

Postby dangling » Wed Mar 22, 2017 9:39 pm

Duckie wrote:
dangling wrote:So if I am doing 2016 TIRA contribution now (before april 15th, 2017) and backrothing it roll over to Roth now, you are saying that no form 8606 for 2016 tax filing? only mention TIRA contribution in TaxAct software (which is what I am using).

When you tell your software you made a contribution to the TIRA for 2016 you also tell it that the contribution was non-deductible. That will trigger a 2016 Form 8606 to track the non-deductible basis.

and because this was done in 2017 - form 8606 will go with 2017 tax returns?

The conversion done in 2017 will go on the 2017 Form 8606.

And then you are saying to do 2017 backroths before Dec 31st, 2017 so both 2016/2017 are done on one form 8606 with 2017 tax return?

If you contribute for 2017 in 2017 and convert that contribution in 2017 both actions will go on the 2017 Form 8606.

Here's a cheat sheet for contributions/conversions over a two-year period. Just replace year 2015 with 2016 and year 2016 with 2017.



That cheat sheet is awesome :) taxact worked out form 8606 as you have mentioned.


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