Hello,
I've been trying to figure out how best to convert my Traditional IRA which I set up solely for the purpose of converting back to my Roth in 2015. I've been kicking this can down the road for a while trying to figure out how to do it and, in the meanwhile, I haven't been investing in an attempt to keep it from getting too messy. I'm about to just convert all of it to get it done, but was advised doing a large sum could really hit me as large additional income if I don't do it right.
Here's the situation:
In 2014 I had contributed $5500 ahead of time to a Roth as I used to always do.
In April 2015, before the filing deadline, I realized my income made me ineligible to have made a full contribution to my Roth and so my bank advisors said I could re-characterize the $2100 portion that I was ineligible to contribute into a newly created Traditional (still nondeductible contributions) IRA and then convert it back. I filled out the form and faxed it in to do so before the tax filing deadline. But because it had earned interest in the Roth that year, the actual amount that went into the traditional IRA was $2368.80 (vs $2100 I requested and listed on my Nondeductible IRA Contribution Form 8606 with my return.
I never did/still have not invested any of it, or the subsequent annual contributions I’ve made every year since.
The contributions were:
$2100 in 2014 (reported as $2100 on 8606 on my return but which Schwab listed on Form 5498 in 2014 and then on a 1099-R in 2015)
$5170 in 2015 (8606 submitted)
$1300 in 2016 (8606 submitted)
$5500 in 2017 (which for some reason my tax software didn’t submit an 8606 nondeductible contribution form for, but which I did not deduct and later added into the cost basis I declared on the subsequent 8606 the following year. I plan to submit a 2017 year 8606 form to correct that now along with possibly a $50 late fee I'm reading about)
$5500 in 2018 (8606 submitted)
Total cost basis is $19570 unless that initial $2368.80 counts as cost basis too (vs the $2100) in which case cost basis equals $19838.80.
The account now has 19915.80 which is like $77.00 in bank interest but otherwise no interest on the initial contributions.
I want to convert all to Roth. I don’t want to get taxed again on it as it was almost all nondeductible. How do I report this on my tax software so that I am not taxed on it aside from the minimal bank interest? Thank you and sorry for the long question!
-B.
