Help w/ Backdoor Roth IRA tax forms

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mliang2
Posts: 3
Joined: Thu Sep 13, 2018 5:47 pm

Help w/ Backdoor Roth IRA tax forms

Post by mliang2 » Thu Sep 13, 2018 6:04 pm

Hi everyone.

Can someone help me with how I should go reporting to the IRS for the situation below? I know I have to fill out form 8606, but I'm really confused on how to handle the transactions from 4/15/14 to 10/24/16.

Thanks!

4/15/14: made a $5500 Roth IRA contribution for the 2014 tax year.

3/5/15: While doing my taxes for 2014 year, realized I've exceeded the income limit for Roth IRA. Called Vanguard and re-characterized the 2014 Roth IRA contribution into a Traditional IRA. Didn't claim any tax benefits

10/24/16: Converted the $6449 traditional IRA from above into a Roth IRA via backdoor. $949 growth

10/31/16: Made $5500 contribution to Traditional IRA for tax year 2016, didn't claim any tax benefits

11/14/16: Backdoor traditional IRA from above to Roth. $142 growth

03/23/18: Made $5500 contribution to Traditional IRA for tax year 2017

03/23/18: Made $5500 contribution to Traditional IRA for tax year 2018

04/02/18: backdoor 2017 and 2017 traditional IRA to Roth. ($266 loss at time of conversion)

Alan S.
Posts: 7803
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Help w/ Backdoor Roth IRA tax forms

Post by Alan S. » Thu Sep 13, 2018 8:10 pm

mliang2 wrote:
Thu Sep 13, 2018 6:04 pm
Hi everyone.

Can someone help me with how I should go reporting to the IRS for the situation below? I know I have to fill out form 8606, but I'm really confused on how to handle the transactions from 4/15/14 to 10/24/16.

Thanks!

4/15/14: made a $5500 Roth IRA contribution for the 2014 tax year.

This does not get reported except in an explanatory statement with your 2014 return regarding the recharacterization.

3/5/15: While doing my taxes for 2014 year, realized I've exceeded the income limit for Roth IRA. Called Vanguard and re-characterized the 2014 Roth IRA contribution into a Traditional IRA. Didn't claim any tax benefits

Explanatory statement referred to above should indicate the amount of your Roth contribution, that you recharacterized it as a TIRA contribution, the date of the recharacterization and the amount that transferred to the TIRA. If you did not do the statement, do not do it now. The 2014 return will also report it as non deductible on Form 8606 for 2014.

10/24/16: Converted the $6449 traditional IRA from above into a Roth IRA via backdoor. $949 growth

Report on Form 8606 for 2016.

10/31/16: Made $5500 contribution to Traditional IRA for tax year 2016, didn't claim any tax benefits


Report on same 8606 as above as a non deductible TIRA contribution for 2016.


11/14/16: Backdoor traditional IRA from above to Roth. $142 growth


Add this conversion to the 10/24 conversion on Form 8606.

03/23/18: Made $5500 contribution to Traditional IRA for tax year 2017


Report as non deductible on Form 8606 for 2017.

03/23/18: Made $5500 contribution to Traditional IRA for tax year 2018

Report as non deductible on Form 8606 for 2018.

04/02/18: backdoor 2017 and 2017 traditional IRA to Roth. ($266 loss at time of conversion)

Report total converted on the 2018 8606.

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FiveK
Posts: 5729
Joined: Sun Mar 16, 2014 2:43 pm

Re: Help w/ Backdoor Roth IRA tax forms

Post by FiveK » Thu Sep 13, 2018 11:11 pm

mliang2 wrote:
Thu Sep 13, 2018 6:04 pm
Hi everyone.

Can someone help me with how I should go reporting to the IRS for the situation below? I know I have to fill out form 8606, but I'm really confused on how to handle the transactions from 4/15/14 to 10/24/16.
If the following accurately represents what you did,
Image
make those entries in the 'Form8606' tab of the personal finance toolbox spreadsheet and it will show the appropriate tax form entries in later rows.

mliang2
Posts: 3
Joined: Thu Sep 13, 2018 5:47 pm

Re: Help w/ Backdoor Roth IRA tax forms

Post by mliang2 » Tue Sep 18, 2018 4:39 pm

Thanks everyone for the advice. Here's what I plan to file:

- file Form 8606 for for 2014. This will set my basis to 5500
- Since in 2016, I converted a total of $12091 of TIRA into Roth; file 8606 claiming a $11000 basis (5500 from 2014 and 5500 from 2016). Result: $1091 on the growth are taxable.
- for year 2017 and 2018, file 8606 w/o having to pay any taxes since the conversion happened quickly.

It seems weird that I have to pay taxes on the growth from post-tax money just to convert it to a Roth.

Please let me know if the actions are correct.

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FiveK
Posts: 5729
Joined: Sun Mar 16, 2014 2:43 pm

Re: Help w/ Backdoor Roth IRA tax forms

Post by FiveK » Tue Sep 18, 2018 5:02 pm

mliang2 wrote:
Tue Sep 18, 2018 4:39 pm
Thanks everyone for the advice. Here's what I plan to file:

- file Form 8606 for for 2014. This will set my basis to 5500
- Since in 2016, I converted a total of $12091 of TIRA into Roth; file 8606 claiming a $11000 basis (5500 from 2014 and 5500 from 2016). Result: $1091 on the growth are taxable.
- for year 2017 and 2018, file 8606 w/o having to pay any taxes since the conversion happened quickly.
That all looks good. You will have a $266 basis that could be used to offset gains in future years, should you leave the money in the tIRA for a while and you get growth on your contribution.
It seems weird that I have to pay taxes on the growth from post-tax money just to convert it to a Roth.
Write your congressperson. :)

mliang2
Posts: 3
Joined: Thu Sep 13, 2018 5:47 pm

Re: Help w/ Backdoor Roth IRA tax forms

Post by mliang2 » Tue Sep 18, 2018 6:21 pm

Thanks again. Appreciate all the help.

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Earl Lemongrab
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Joined: Tue Jun 10, 2014 1:14 am

Re: Help w/ Backdoor Roth IRA tax forms

Post by Earl Lemongrab » Wed Sep 19, 2018 12:49 pm

mliang2 wrote:
Tue Sep 18, 2018 4:39 pm
It seems weird that I have to pay taxes on the growth from post-tax money just to convert it to a Roth.
If you didn't, it would already be a Roth. Do you think you should be able to let it sit for years, double in value, and then convert without taxes?
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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