Gut check on Roth Re-categorization + Taxes + Back Door Roth

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Ryvius
Posts: 5
Joined: Sat Dec 26, 2015 11:47 pm

Gut check on Roth Re-categorization + Taxes + Back Door Roth

Post by Ryvius » Sun Feb 11, 2018 8:57 pm

The situation:

- I made too much in 2017 but already frontloaded my Roth IRA and made about 800 in profits ($6300 total) during 2017.
- I have asked my broker to recategorize my 2017 contribution and and any associated profits (the 800) into a tIRA.

I plan to do the following:
- Report that I recategorize my IRA contribution in Turbo tax for my 2017 return so I don't get dinged by the IRS
- I plan to contribute an additional 5500 this year to my new tIRA.
- Wait a few more days after I max my 2018 contribution out and roll the tIRA (which will be 10k+ by that point) into my Roth IRA, thereby closing the tIRA account
- Wait until I file my 2018 tax return to report the Backdoor Roth via 1099-R (my broker said they wouldn't be issuing tax forms until next year since I didn't recategorize until Feb 2018)is year

Am I missing anything on my tax reporting obligation? I'm I going to trip over anything tIRA related when I contribute? Should I just roll over the tIRA before I contribute more and open up a new one for 2018 (feels messy)?

Thanks,
Ry

Ryvius
Posts: 5
Joined: Sat Dec 26, 2015 11:47 pm

Re: Gut check on Roth Re-categorization + Taxes + Back Door Roth

Post by Ryvius » Mon Feb 12, 2018 10:51 pm

Sorry to add a follow-up, was curious if my outline on how to navigate this situation meshed up with the experts here. I don't want to accidentally trip over a rule I'm not 100% familiar with.

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Epsilon Delta
Posts: 7026
Joined: Thu Apr 28, 2011 7:00 pm

Re: Gut check on Roth Re-categorization + Taxes + Back Door Roth

Post by Epsilon Delta » Tue Feb 13, 2018 12:05 am

Ryvius wrote:
Sun Feb 11, 2018 8:57 pm
- Report that I recategorize my IRA contribution in Turbo tax for my 2017 return so I don't get dinged by the IRS
This should include a 2017 form 8606 to report the non-deductible contribution.
Ryvius wrote:
Sun Feb 11, 2018 8:57 pm
- Wait until I file my 2018 tax return to report the Backdoor Roth via 1099-R (my broker said they wouldn't be issuing tax forms until next year since I didn't recategorize until Feb 2018)is year
You don't report a 1099-R. The broker sends you and the IRA the 1099-R. You report the 2018 non-deductible contribution and the rollover distribution shown on the 1099-R on a 2018 form 8606.

Other than that you're good. You may already know about needing Form 8606 for each year, but it was not 100% clear.

Ryvius
Posts: 5
Joined: Sat Dec 26, 2015 11:47 pm

Re: Gut check on Roth Re-categorization + Taxes + Back Door Roth

Post by Ryvius » Tue Feb 13, 2018 1:03 am

"Other than that you're good. You may already know about needing Form 8606 for each year, but it was not 100% clear."

Right, I believe TurboTax generates this for me after I report the recategorization. I'll verify that's generated both this year and next year.

Thanks for verifying I'm in the ballpark!

ivk5
Posts: 148
Joined: Thu Sep 22, 2016 9:05 am

Re: Gut check on Roth Re-categorization + Taxes + Back Door Roth

Post by ivk5 » Tue Feb 13, 2018 4:37 am

It's easy to get tripped up on terminology in this area, particularly with the tax software interview questions, so be aware that "recharacterization" is the term for what you are calling "recategorization" (not a term with special meaning for IRAs).

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