@kumingtail wrote:
Would you kindly help me to resolve the issue of getting 6% penalty of access contribution?
Here is the situation:
- Made $5,500 contribution to Traditional IRA in 2018
- Made delayed conversion (including $300 of gains) from Traditional to Roth IRA (Backdoor) on March. 2019
- Could not received nor included 1099-R of 2018 due to the late conversion
- Made $6,000 contribution and conversion to Roth in 2019
- Received about gross distribution of about $11,800 in 1099-R in 2019
- Putting $11,800 as nondeductible contributions to Traditional IRA and Roth IRA resulted TT that I should pay 6% penalty
You do not "make up" a 1099-R.
Was your 2018 Traditional IRA contribution non-deductible (i.e. you did not deduct it on line 32 on the 1040 schedule 1)?
If so then you should have filed a 2018 8606 form with the non -deductible contribution on line 1 and of no other prior non-deductible contributions on line 14. For the 2019 contribution enter in in the IRA contributions section and ir the question is asked, say you do NOT want to deduct it.
Enter the 2019 1099-R and answer the follow-up questions.
Answer the follow-up questions answer the question that you moved the money to another retirement. The screen will open up with choices of where it was moved. Choose you converted it to Roth IRA.
When asked if you have made any non-deductible contributions say " "yes" then enter the non-deductible contributions made for tax years before 2019 that will be the 2018 8606 line 14 value.
Enter the 2019 year end value of your Traditional IRA a "0" (zero) - if it is in fact zero - this tax free Roth conversion will not work if it is not zero.
[If you had any other Traditional IRA at the end of 2019, then the nondeductible "basis" must be pro-rated over the current distribution and the total IRA value and only a portion of the Roth conversion will be non taxable and part will be taxable, with the remaining non-deductible basis carrying forward for future distributions. You can never only withdrew the nondeductible basis as long as the IRA exists and has a value more than zero.]
The non-deductible amount of your contribution will be subtracted from the taxable amount of the conversion on then 8606 form and enter on line 4a of them 1040 form and a zero taxable amount on line 4b if you did it right.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
