Backdoor Roth IRA Questions

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Topic Author
investor171991
Posts: 8
Joined: Mon May 03, 2021 12:54 pm

Backdoor Roth IRA Questions

Post by investor171991 »

Hi everyone! I made another post regarding the portfolio allocation of an upcoming backdoor Roth, but I wanted to start a post on the actual “mechanics” of it.

As some background, I just opened a traditional and Roth IRA with fidelity ($0). I was going to contribute 6,000k for 2021 some point this Summer but have realized I can still make 2020 contributions. Just some questions of this:

-does it matter that I already filed my 2020 taxes
-do I need to fill out a form 8606 for the 2020 contributions now and send to IRS or can I wait until I do my 2021 taxes in 2022, and send in the form along with the form 8606 for my 2021 contributions I plan to make later this year?
-does fidelity email you this form or do you need to obtain and fill it out yourself?
-what other tax forms may I need come tax filing for this backdoor Roth? I assume Fidelity automatically sends these?

Thanks guys!
placeholder
Posts: 4583
Joined: Tue Aug 06, 2013 12:43 pm

Re: Backdoor Roth IRA Questions

Post by placeholder »

The 8606 for 2020 should be sent in a soon as possible so just mail it in (remember to sign the form).
retiredjg
Posts: 43939
Joined: Thu Jan 10, 2008 12:56 pm

Re: Backdoor Roth IRA Questions

Post by retiredjg »

Fidelity does not send you the form. You find it in your own tax software or you can download it from the internet. You should fill it out now and mail it to the IRS. Be sure to sign it. You will not hear from them.

If you do a the conversion step in 2021, Fidelity will send you a 1099 next year.
Topic Author
investor171991
Posts: 8
Joined: Mon May 03, 2021 12:54 pm

Re: Backdoor Roth IRA Questions

Post by investor171991 »

Thanks guys! So I’ll do the 2020 contribution/conversion ASAP and send in form 8606 to the IRS (regardless of the fact that I already did my 2020 taxes), and then I will fill out another form 8606 and submit it with my taxes next year for my 2021 backdoor contributions?
retiredjg
Posts: 43939
Joined: Thu Jan 10, 2008 12:56 pm

Re: Backdoor Roth IRA Questions

Post by retiredjg »

investor171991 wrote: Tue May 04, 2021 7:39 am Thanks guys! So I’ll do the 2020 contribution/conversion ASAP and send in form 8606 to the IRS (regardless of the fact that I already did my 2020 taxes), and then I will fill out another form 8606 and submit it with my taxes next year for my 2021 backdoor contributions?
Not quite. You can do the 2020 contribution step now and send that 2020 Form 8606 to the IRS. The conversion step will be done in 2021 and is reported with your 2021 taxes.

Contribution is reported with tax year the contribution was for.

Conversion is reported with taxes the conversion happens in.

You should download two consecutive year Forms 8606 and practice with a pencil to figure it out. Oldest year gets done first and line 14 gets sent to the next year.
User avatar
Duckie
Posts: 8145
Joined: Thu Mar 08, 2007 2:55 pm

Re: Backdoor Roth IRA Questions

Post by Duckie »

investor171991 wrote: Mon May 03, 2021 10:56 pm I just opened a traditional and Roth IRA with fidelity ($0). I was going to contribute 6,000k for 2021 some point this Summer but have realized I can still make 2020 contributions. Just some questions of this:

-does it matter that I already filed my 2020 taxes
No. Form 8606 can be mailed in on its own.
-do I need to fill out a form 8606 for the 2020 contributions now and send to IRS
Yes.
or can I wait until I do my 2021 taxes in 2022, and send in the form along with the form 8606 for my 2021 contributions I plan to make later this year?
The contribution for 2020 goes on the 2020 Form 8606. Any contributions for 2021 and all conversions done in 2021 go on the 2021 Form 8606.
-does fidelity email you this form or do you need to obtain and fill it out yourself?
You get it yourself. Here is the 2020 form. After you contribute the $6000 for 2020, download the form, print it out, fill it out, and snail mail it in. When you fill it out for 2020 you will enter:
  • Part I
    Line 1 -- 6000
    Line 2 -- 0
    Line 3 -- 6000
    Line 14 -- 6000 (current basis, goes on line 2 next time)
That's it for 2020.
-what other tax forms may I need come tax filing for this backdoor Roth? I assume Fidelity automatically sends these?
No others for 2020. You'll get a 1099-R from Fidelity next year for the conversion.

Next year your 2021 Form 8606 might look something like this:
  • Part I
    Line 1 -- 6000
    Line 2 -- 6000 (previous basis from line 14 last time)
    Line 3 -- 12,000
    Line 4 -- 0
    Line 5 -- 12,000
    Line 6 -- 0 (this had better be zero or pro-rata applies)
    Line 7 -- 0
    Line 8 -- 12,020 (amount converted in 2021, I gave you $20 in earnings just for fun)
    Line 9 -- 12,020
    Line 10 -- 0.998336
    Line 11 -- 12,000
    Line 12 -- 0
    Line 13 -- 12,000
    Line 14 -- 0 (current basis)
    Line 15a -- 0
    Line 15b -- 0
    Line 15c -- 0
    Part II
    Line 16 -- 12,020 (amount converted)
    Line 17 -- 12,000 (non-taxable basis)
    Line 18 -- 20 (taxable amount, goes on 1040)
bpAgent86
Posts: 5
Joined: Tue Apr 13, 2021 2:50 pm

Re: Backdoor Roth IRA Questions

Post by bpAgent86 »

I found this extremely useful step by step guide a while back...

https://www.whitecoatinvestor.com/backd ... -tutorial/
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