Hi,
I changed employer last year (2021) and rolled over my 401k to a traditional ira. In the same year, I made a backdoor roth conversion by contributing $6k to a different IRA and converting the money. Since I did a roth backdoor conversion, I am required to file a form 8606.
In form 8606 line 6, it asks for the value of ALL of my traditional IRA accounts. Do I include the value of my converted 401k in this line? If I do, then form 8606 will treat the sudden increase of my IRA account value as capital gain from investment, and significantly shrink the non-taxable portion of my backdoor conversion.
To make the example more concrete - I have $6k cost basis from previous year, contributed $6k to traditional IRA in 2021 and immediately converted all the money ROTH IRA. This should be a non-taxable event. In the same year, I also converted $80k in 401k to traditional IRA because I changed jobs. This should be a non-taxable event. However, given how 8606 is structured, if I report $80k as my total IRA value at the end of 2021, then the form will treat the event as me starting at $6k cost basis, growing the money to $80k by the end of the year, and converting $6k of my huge account (totaling $80k in value) to ROTH. If I follow the form, I have $5.5k of taxable amount.
Anyone has any idea on how to report the two non-taxable event appropriately? Should I not include 401k conversion money in line 6 of 8606?
