Backdoor conversion at 2 different brokerages

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Topic Author
amindu
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Joined: Thu Aug 04, 2016 11:59 am

Backdoor conversion at 2 different brokerages

Post by amindu » Fri Jan 10, 2020 12:27 pm

Hi All - Would it make a difference if you have interest from prior years under $1 say at fidelity in a TIRA, and you are planning on making new contributions in a TIRA at Vanguard this year to convert into a Roth can you convert at different brokerages? Or would that lead to some sort of issue, in essence the total would be the same on the Form 8606 but wasn't sure. Also since the interest in the TIRA is under a $1 would there be any issue in just leaving it as is, it could all be considered rounding, or is the sound advice to convert and keep a zero balance in it always? Thanks.

Silk McCue
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Re: Backdoor conversion at 2 different brokerages

Post by Silk McCue » Fri Jan 10, 2020 12:37 pm

If it less than 50c then it rounds down to zero on the tax return. If 50c or more just convert it to avoid having to deal with it in your tax return unnecessarily.

You can convert at as many brokerages as you want in the same year. No restrictions on that.

Cheers

Topic Author
amindu
Posts: 115
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Re: Backdoor conversion at 2 different brokerages

Post by amindu » Fri Jan 10, 2020 1:15 pm

amindu wrote:
Fri Jan 10, 2020 12:27 pm
Hi All - Would it make a difference if you have interest from prior years under $1 say at fidelity in a TIRA, and you are planning on making new contributions in a TIRA at Vanguard this year to convert into a Roth can you convert at different brokerages? Or would that lead to some sort of issue, in essence the total would be the same on the Form 8606 but wasn't sure. Also since the interest in the TIRA is under a $1 would there be any issue in just leaving it as is, it could all be considered rounding, or is the sound advice to convert and keep a zero balance in it always? Thanks.
Thanks, does it matter that the interest earned was from a prior year?

Silk McCue
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Re: Backdoor conversion at 2 different brokerages

Post by Silk McCue » Fri Jan 10, 2020 1:28 pm

amindu wrote:
Fri Jan 10, 2020 1:15 pm

Thanks, does it matter that the interest earned was from a prior year?
It’s the fact that you have a reportable balance for an existing IRA or not that matters.

Cheers

Topic Author
amindu
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Re: Backdoor conversion at 2 different brokerages

Post by amindu » Fri Jan 10, 2020 2:34 pm

Thanks

livesoft
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Re: Backdoor conversion at 2 different brokerages

Post by livesoft » Fri Jan 10, 2020 2:40 pm

Convert. Convert. Convert.

Years ago, I did a full conversion and never put any money again into the traditional IRA. The brokerage asked me if I wanted to close the account after a year and did not charge me their standard account closing fee.
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Topic Author
amindu
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Re: Backdoor conversion at 2 different brokerages

Post by amindu » Mon Jan 13, 2020 4:40 pm

livesoft wrote:
Fri Jan 10, 2020 2:40 pm
Convert. Convert. Convert.

Years ago, I did a full conversion and never put any money again into the traditional IRA. The brokerage asked me if I wanted to close the account after a year and did not charge me their standard account closing fee.
Thanks, is my conclusion correct that on the 8606 i would show line 1 as $6,000, however on line 2 where it asks "enter your total basis" this would be the $1 of interest that was earned on the 2019 contribution that sat in the money market account for a couple days, same for line 6. value of all traditional IRAs would also be the $1? So in essence i would pay tax on the $1? Thanks.

FactualFran
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Re: Backdoor conversion at 2 different brokerages

Post by FactualFran » Mon Jan 13, 2020 6:21 pm

amindu wrote:
Mon Jan 13, 2020 4:40 pm
Thanks, is my conclusion correct that on the 8606 i would show line 1 as $6,000, however on line 2 where it asks "enter your total basis" this would be the $1 of interest that was earned on the 2019 contribution that sat in the money market account for a couple days, same for line 6. value of all traditional IRAs would also be the $1? So in essence i would pay tax on the $1? Thanks.
The $1 return earned is NOT part of the basis on Line 2 of Form 8606. The basis of a traditional IRA is the amount of non-deducted contributions that have been made, adjusted for the pro-rata portion taken with distributions, including Roth conversions. The return earned is part of Line 6, the sum of the balances of your IRA at the end of the year.

Whatever is calculated as the taxable of distributions and conversions using Form 8606 becomes part of your Adjusted Gross Income (AGI). A $1 increase in your AGI will not necessarily result in you owing more in income tax.

Topic Author
amindu
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Re: Backdoor conversion at 2 different brokerages

Post by amindu » Mon Jan 13, 2020 6:51 pm

FactualFran wrote:
Mon Jan 13, 2020 6:21 pm
amindu wrote:
Mon Jan 13, 2020 4:40 pm
Thanks, is my conclusion correct that on the 8606 i would show line 1 as $6,000, however on line 2 where it asks "enter your total basis" this would be the $1 of interest that was earned on the 2019 contribution that sat in the money market account for a couple days, same for line 6. value of all traditional IRAs would also be the $1? So in essence i would pay tax on the $1? Thanks.
The $1 return earned is NOT part of the basis on Line 2 of Form 8606. The basis of a traditional IRA is the amount of non-deducted contributions that have been made, adjusted for the pro-rata portion taken with distributions, including Roth conversions. The return earned is part of Line 6, the sum of the balances of your IRA at the end of the year.

Whatever is calculated as the taxable of distributions and conversions using Form 8606 becomes part of your Adjusted Gross Income (AGI). A $1 increase in your AGI will not necessarily result in you owing more in income tax.
Gotcha, thanks, i see it now.

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