Backdoor Roth at Fidelity question

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lstone19
Posts: 997
Joined: Fri Nov 03, 2017 3:33 pm

Re: Backdoor Roth at Fidelity question

Post by lstone19 »

RJC wrote: Wed Jan 13, 2021 12:42 pm
Here are my steps:
1. Contribute 6k to my Trad IRA ($0 balance)
2. Convert 6k from my Trad IRA to Roth
3. At this point it asks "Would you like to withhold taxes?" and when I click "I want to pay the taxes now", it tells me to call them.

Should I click "I don't want to pay the taxes now"? My understanding from the various instructions (including White Coat Investor) is that I should not withhold taxes when I convert.

It also gives me this message: "We don't currently support tax withholding for this transfer online. To have have taxes withheld now and finish your transfer, call Fidelity at 800-544-6666."

I'm not trying to withhold tax for this transfer online. Sounds like a software issue?
When you click "I want to pay taxes now", you're saying you want taxes withheld. Click "I don't want to pay taxes now".

"Paying taxes now" and "having taxes withheld" are not alternatives - they're the same thing!
RetiredAL
Posts: 1187
Joined: Tue Jun 06, 2017 12:09 am
Location: SF Bay Area

Re: Backdoor Roth at Fidelity question

Post by RetiredAL »

RJC wrote: Wed Jan 13, 2021 12:42 pm
lstone19 wrote: Wed Jan 13, 2021 9:55 am
RJC wrote: Wed Jan 13, 2021 9:41 am I don’t want it withheld. That’s the thing. I’m trying to pay taxes on it now but won’t let me unless I call them. In the past it allowed me to do it all online.
I think you are confused by what things mean: "Taxes withheld" = "pay taxes on it now". And I'll repeat my question that exodusNH has now asked as well: why do you to have an amount withheld to pay taxes on a backdoor Roth? Perhaps you also don't understand what "backdoor Roth" means.
Thanks everyone for responding to my question.

Here are my steps:
1. Contribute 6k to my Trad IRA ($0 balance)
2. Convert 6k from my Trad IRA to Roth
3. At this point it asks "Would you like to withhold taxes?" and when I click "I want to pay the taxes now", it tells me to call them.

Should I click "I don't want to pay the taxes now"? My understanding from the various instructions (including White Coat Investor) is that I should not withhold taxes when I convert.

It also gives me this message: "We don't currently support tax withholding for this transfer online. To have have taxes withheld now and finish your transfer, call Fidelity at 800-544-6666."

I'm not trying to withhold tax for this transfer online. Sounds like a software issue?
That is because the same process is used for a regular tIRA to Roth conversions, where one may want to withhold taxes. They request a call so they can clearly identify if you want: 1.) A specific $ amount withdrawal from the tIRA where the conversion amount will be withdrawal - taxes. 2.) A "gross-up" where it's a specific amount is to be converted and the withdrawal is grossed up to cover taxes, conversion + taxes. Thus when you want taxes withheld, they don't do it online. It's been that way for years.

Generally tax withholding doesn't apply to the classical "backdoor" process, because even if you waited days/weeks, at most there is only a couple of $ of taxes involved. So don't select to have taxes withheld.
RJC
Posts: 768
Joined: Fri Dec 14, 2018 1:40 pm

Re: Backdoor Roth at Fidelity question

Post by RJC »

delete
Last edited by RJC on Wed Jan 13, 2021 2:26 pm, edited 1 time in total.
RJC
Posts: 768
Joined: Fri Dec 14, 2018 1:40 pm

Re: Backdoor Roth at Fidelity question

Post by RJC »

lstone19 wrote: Wed Jan 13, 2021 12:49 pm
RJC wrote: Wed Jan 13, 2021 12:42 pm
Here are my steps:
1. Contribute 6k to my Trad IRA ($0 balance)
2. Convert 6k from my Trad IRA to Roth
3. At this point it asks "Would you like to withhold taxes?" and when I click "I want to pay the taxes now", it tells me to call them.

Should I click "I don't want to pay the taxes now"? My understanding from the various instructions (including White Coat Investor) is that I should not withhold taxes when I convert.

It also gives me this message: "We don't currently support tax withholding for this transfer online. To have have taxes withheld now and finish your transfer, call Fidelity at 800-544-6666."

I'm not trying to withhold tax for this transfer online. Sounds like a software issue?
When you click "I want to pay taxes now", you're saying you want taxes withheld. Click "I don't want to pay taxes now".

"Paying taxes now" and "having taxes withheld" are not alternatives - they're the same thing!
That is the confusing part. I guess the language is throwing me off. Thanks!
lstone19
Posts: 997
Joined: Fri Nov 03, 2017 3:33 pm

Re: Backdoor Roth at Fidelity question

Post by lstone19 »

RJC wrote: Wed Jan 13, 2021 2:14 pm I don't want my taxes withheld; however, it doesn't give me the option to move forward if I select "I want to pay the taxes now". Am I not understanding the language correctly?
Getting a little frustrated here as you clearly are not reading what we're all saying. When you say "I want to pay the taxes now", you are saying "withhold taxes". Those mean the same thing. Since you don't want taxes withheld, select "I don't want to pay taxes now."

EDIT: writing at the same time as your last post but I think you finally get it.
RJC
Posts: 768
Joined: Fri Dec 14, 2018 1:40 pm

Re: Backdoor Roth at Fidelity question

Post by RJC »

lstone19 wrote: Wed Jan 13, 2021 2:26 pm
RJC wrote: Wed Jan 13, 2021 2:14 pm I don't want my taxes withheld; however, it doesn't give me the option to move forward if I select "I want to pay the taxes now". Am I not understanding the language correctly?
Getting a little frustrated here as you clearly are not reading what we're all saying. When you say "I want to pay the taxes now", you are saying "withhold taxes". Those mean the same thing. Since you don't want taxes withheld, select "I don't want to pay taxes now."

EDIT: writing at the same time as your last post but I think you finally get it.
I just don't remember going through this process last year.

Thanks for being patient. Much appreciated.
RetiredAL
Posts: 1187
Joined: Tue Jun 06, 2017 12:09 am
Location: SF Bay Area

Re: Backdoor Roth at Fidelity question

Post by RetiredAL »

RJC wrote: Wed Jan 13, 2021 2:14 pm
RetiredAL wrote: Wed Jan 13, 2021 2:08 pm
RJC wrote: Wed Jan 13, 2021 12:42 pm
lstone19 wrote: Wed Jan 13, 2021 9:55 am
RJC wrote: Wed Jan 13, 2021 9:41 am I don’t want it withheld. That’s the thing. I’m trying to pay taxes on it now but won’t let me unless I call them. In the past it allowed me to do it all online.
I think you are confused by what things mean: "Taxes withheld" = "pay taxes on it now". And I'll repeat my question that exodusNH has now asked as well: why do you to have an amount withheld to pay taxes on a backdoor Roth? Perhaps you also don't understand what "backdoor Roth" means.
Thanks everyone for responding to my question.

Here are my steps:
1. Contribute 6k to my Trad IRA ($0 balance)
2. Convert 6k from my Trad IRA to Roth
3. At this point it asks "Would you like to withhold taxes?" and when I click "I want to pay the taxes now", it tells me to call them.

Should I click "I don't want to pay the taxes now"? My understanding from the various instructions (including White Coat Investor) is that I should not withhold taxes when I convert.

It also gives me this message: "We don't currently support tax withholding for this transfer online. To have have taxes withheld now and finish your transfer, call Fidelity at 800-544-6666."

I'm not trying to withhold tax for this transfer online. Sounds like a software issue?
That is because the same process is used for a regular tIRA to Roth conversions, where one may want to withhold taxes. They request a call so they can clearly identify if you want: 1.) A specific $ amount withdrawal from the tIRA where the conversion amount will be withdrawal - taxes. 2.) A "gross-up" where it's a specific amount is to be converted and the withdrawal is grossed up to cover taxes, conversion + taxes. Thus when you want taxes withheld, they don't do it online. It's been that way for years.

Generally tax withholding doesn't apply to the classical "backdoor" process, because even if you waited days/weeks, at most there is only a couple of $ of taxes involved. So don't select to have taxes withheld.
I don't want my taxes withheld; however, it doesn't give me the option to move forward if I select "I want to pay the taxes now". Am I not understanding the language correctly?
You do not want to select "pay taxes now". The Backdoor is conversion "non-deducted" $, which is so noted when you fill out the 8606 form next tax season.

The cannot complete online statement is to prevent someone doing a routine deductible tIRA conversion and doing the tax calc's wrong. It does not apply to you, unless you have years of non-deductible contributions with a pile of earnings.

Remember, the "backdoor" is a way around the direct contribution limits, it uses the standard conversion process but does so using non-deducted $.

A regular conversion may have (likely has) deductible contribution $ that would created a taxable event during the conversion, to which you may pay taxes on now, or pay via estimated and/or April 15 with your tax forms.

These are two completely different concepts, but use similar processes to achieve.
RJC
Posts: 768
Joined: Fri Dec 14, 2018 1:40 pm

Re: Backdoor Roth at Fidelity question

Post by RJC »

RetiredAL wrote: Wed Jan 13, 2021 2:35 pm
RJC wrote: Wed Jan 13, 2021 2:14 pm
RetiredAL wrote: Wed Jan 13, 2021 2:08 pm
RJC wrote: Wed Jan 13, 2021 12:42 pm
lstone19 wrote: Wed Jan 13, 2021 9:55 am

I think you are confused by what things mean: "Taxes withheld" = "pay taxes on it now". And I'll repeat my question that exodusNH has now asked as well: why do you to have an amount withheld to pay taxes on a backdoor Roth? Perhaps you also don't understand what "backdoor Roth" means.
Thanks everyone for responding to my question.

Here are my steps:
1. Contribute 6k to my Trad IRA ($0 balance)
2. Convert 6k from my Trad IRA to Roth
3. At this point it asks "Would you like to withhold taxes?" and when I click "I want to pay the taxes now", it tells me to call them.

Should I click "I don't want to pay the taxes now"? My understanding from the various instructions (including White Coat Investor) is that I should not withhold taxes when I convert.

It also gives me this message: "We don't currently support tax withholding for this transfer online. To have have taxes withheld now and finish your transfer, call Fidelity at 800-544-6666."

I'm not trying to withhold tax for this transfer online. Sounds like a software issue?
That is because the same process is used for a regular tIRA to Roth conversions, where one may want to withhold taxes. They request a call so they can clearly identify if you want: 1.) A specific $ amount withdrawal from the tIRA where the conversion amount will be withdrawal - taxes. 2.) A "gross-up" where it's a specific amount is to be converted and the withdrawal is grossed up to cover taxes, conversion + taxes. Thus when you want taxes withheld, they don't do it online. It's been that way for years.

Generally tax withholding doesn't apply to the classical "backdoor" process, because even if you waited days/weeks, at most there is only a couple of $ of taxes involved. So don't select to have taxes withheld.
I don't want my taxes withheld; however, it doesn't give me the option to move forward if I select "I want to pay the taxes now". Am I not understanding the language correctly?
You do not want to select "pay taxes now". The Backdoor is conversion "non-deducted" $, which is so noted when you fill out the 8606 form next tax season.

The cannot complete online statement is to prevent someone doing a routine deductible tIRA conversion and doing the tax calc's wrong. It does not apply to you, unless you have years of non-deductible contributions with a pile of earnings.

Remember, the "backdoor" is a way around the direct contribution limits, it uses the standard conversion process but does so using non-deducted $.

A regular conversion may have (likely has) deductible contribution $ that would created a taxable event during the conversion, to which you may pay taxes on now, or pay via estimated and/or April 15 with your tax forms.

These are two completely different concepts, but use similar processes to achieve.
Thank you. The language is getting clearer now. :beer
lstone19
Posts: 997
Joined: Fri Nov 03, 2017 3:33 pm

Re: Backdoor Roth at Fidelity question

Post by lstone19 »

I have to suspect that the poster thought there was a choice of either having taxes withheld and being reconciled at the end of the year on the 1040 and just paying the tax now independent of the 1040. But there is never an option to pay income tax now and leave the 1040 out of it. All income tax payments (other than a final one with the 1040) are merely payments on account whether they be by withholding or by estimated payments, always reconciled at the end of the year on Form 1040. So "pay now" means "withhold" as the other option is not to pay anything now and handle it by other means.
cabfranc
Posts: 76
Joined: Tue Jun 25, 2019 12:46 pm

Re: Backdoor Roth at Fidelity question

Post by cabfranc »

I did not experience any delays at Fidelity. I transferred the $6,000 from my bank yesterday and it was credited today and I transferred it to my Roth IRA.
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