$4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
backdoorRoth
Posts: 69
Joined: Wed Jan 31, 2018 4:13 pm

$4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by backdoorRoth »

Somehow there is $4.14 sitting in my IRA at Fidelity. I want to get the IRA back to zero to simplify my annual backdoor Roth conversions. I was going to just withdraw the $4 and pay taxes/penalty on it, but Fidelity has a $10 minimum for transferring to another bank or cutting a check. Should I figure out how to transfer the money from the IRA to a Roth IRA?
Uniballer
Posts: 316
Joined: Thu Apr 20, 2017 9:55 am

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by Uniballer »

Just convert it when you do your backdoor conversion. How much tax will you pay on $4? If it was a million then it would be different.
Millennial
Posts: 372
Joined: Tue Mar 25, 2014 4:46 pm

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by Millennial »

Just leave it there and do the backdoor - including this $4 in the conversion. You might end up paying $1 of tax, but the tax forms aren't complicated. Then it'll be gone forever.
User avatar
ipdiddly
Posts: 81
Joined: Fri Jan 01, 2021 11:24 am

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by ipdiddly »

Your problem is fairly typical as inevitably an IRA may have some leftover cash in it (e.g. because of a few days or weeks of interest). There is no need to clear out the $4 preemptively. Just make your usual non-deductible IRA contribution (say $6000), then simply convert the full $6004 to Roth. When you do your taxes, assuming the $4 represents gains in the IRA, you will simply pay taxes on the $4. In other words, your 1099 will show $6004 of reportable distribution, but $6000 of that will be basis that is subtracted out on your 8606.
Topic Author
backdoorRoth
Posts: 69
Joined: Wed Jan 31, 2018 4:13 pm

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by backdoorRoth »

I should clarify -- the $4 is in a Fidelity account, which I don't use. I do my backdoor Roth conversations each year in my Vanguard accounts.

For some reason everything I try to do online with the $4 -- withdraw, contribute to the (empty) Roth I have at Fidelity, convert the IRA to Roth -- all keeps taking me to a page that will only let me select an external bank account to move the money to. Not sure what's going on.
Last edited by backdoorRoth on Wed Jan 13, 2021 11:11 am, edited 1 time in total.
SS Rambo
Posts: 187
Joined: Wed Jan 29, 2020 10:55 am

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by SS Rambo »

Then convert it to a fidelity Roth. Or roll it over to the vanguard IRA. Or yes, pull it out and pay the penalty but that seems like a blemish that could be avoided but digitally submitting a transfer (or conversion) form at Fidelity then being done with it. Good luck, congrats on the Roth money!
Uniballer
Posts: 316
Joined: Thu Apr 20, 2017 9:55 am

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by Uniballer »

One approach: contribute $1000 of your backdoor money to the Fidelity IRA, then transfer that whole account to Vanguard. Then contribute the rest at Vanguard and convert it all...
HomeStretch
Posts: 5379
Joined: Thu Dec 27, 2018 3:06 pm

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by HomeStretch »

Call Fidelity to have a rep help you. Call wait times have been reasonable for me in recent weeks.
life in slices
Posts: 175
Joined: Mon Apr 15, 2019 6:00 pm

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by life in slices »

IMO just cash it out and close the account if you want - its only $4 - even if you have to pay fees and taxes, it is only $4
Everything else takes more time and your time is probably more valuable than the $4
aristotelian
Posts: 8576
Joined: Wed Jan 11, 2017 8:05 pm

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by aristotelian »

If you can't figure out how to remove it, you can always just do the pro rata calculation. Your $6000 conversion would be 99.93% nontaxable.
Topic Author
backdoorRoth
Posts: 69
Joined: Wed Jan 31, 2018 4:13 pm

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by backdoorRoth »

Ok, I finally got Fidelity to just withdraw the $4 and send it to my regular bank account. How do I account for this on my tax return? I believe it was earnings from a nondeductible IRA contribution. Do I deal with it when I file 2021 taxes next year? Is it just a typical early IRA withdrawal so it will have the penalty? I don't really care since it's just $4 - just want to know how to file it property for Uncle Sam.
livesoft
Posts: 74457
Joined: Thu Mar 01, 2007 8:00 pm

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by livesoft »

Fidelity will send you a 1099-R for the withdrawal and you will enter that 1099-R into your tax prep software.

BTW, you can also put $4 into another IRA within 60 days and you will have an indirect rollover. https://www.irs.gov/retirement-plans/pl ... tributions
Wiki This signature message sponsored by sscritic: Learn to fish.
123
Posts: 6727
Joined: Fri Oct 12, 2012 3:55 pm

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by 123 »

backdoorRoth wrote: Fri Jan 15, 2021 1:45 pm Ok, I finally got Fidelity to just withdraw the $4 and send it to my regular bank account. How do I account for this on my tax return? I believe it was earnings from a nondeductible IRA contribution. Do I deal with it when I file 2021 taxes next year? Is it just a typical early IRA withdrawal so it will have the penalty? I don't really care since it's just $4 - just want to know how to file it property for Uncle Sam.
Fidelity will send you a 1099-R after 2021 is over. If you're under 59 1/2 a tax penalty would apply. Tax software will be able to handle it as a routine matter, as will paper tax forms if you use those.
Last edited by 123 on Fri Jan 15, 2021 1:52 pm, edited 1 time in total.
The closest helping hand is at the end of your own arm.
User avatar
Wiggums
Posts: 3110
Joined: Thu Jan 31, 2019 8:02 am

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by Wiggums »

livesoft wrote: Fri Jan 15, 2021 1:48 pm Fidelity will send you a 1099-R for the withdrawal and you will enter that 1099-R into your tax prep software.

BTW, you can also put $4 into another IRA within 60 days and you will have an indirect rollover. https://www.irs.gov/retirement-plans/pl ... tributions
+1
User avatar
David Jay
Posts: 9980
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: $4 in IRA - how to clear it out so I can do backdoor Roth conversions?

Post by David Jay »

123 wrote: Fri Jan 15, 2021 1:50 pmIf you're under 59 1/2 a tax penalty would apply.
Oh, no! Another 41 cents of tax penalty. :wink:
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Post Reply