DanaB27
Expert Alumni

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In regards to the comment, when Diane answered the original question "making a nondeductible contribution in 2020 and then convert right away" then yes, your basis from prior years would be $0. But added information in your posts at a later time, stating you recharacterized a 2020 Roth contribution (this will be reported on your 2020 tax return) that you converted in 2021. Therefore, you have a prior year basis to enter on your 2021 return.

 

If you have a prior year basis of $2,000 plus the 2021 nondeductible contribution of $6,000 then you have a total basis of $8,000 before converting.

 

Assuming you have $20,000 value left in the traditional IRA on December 31, 2021:

 

 

Value in traditional, SEP, and SIMPLE IRA on Dec 31, 2021              $20,000

Distributions                                                                                            $0

Conversions to Roth                                                                               $  8,000

Total                                                                                                          $28,000

 

Basis $8,000  

 

$8,000/$28,000 = 0.286

 

Nontaxable Conversion part $8,000 x 0.286 = $2,288

Therefore $5,712 are taxable.

The leftover basis of $5,712 can be used for future distributions and conversions.

 

 

Please be aware, that the recommendation that your financial advisor gave you only works if no Traditional, SEP, or SIMPLE IRA  account existsBut your wife moved the funds from the 401k to the traditional IRA and then the backdoor Roth will not work smoothly as intended.

 

@dhuynh44 

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