Thank you very much. To make certain I understand correctly:
1. A rollover IRA is just one type of a traditional IRA, even though it might have started as a 401K plan?
2. When you are making a conversion from a traditional IRA that has some basis to a Roth IRA, you are essentially taking a distribution from the traditional IRA, and you get a prorated credit for the basis in the distribution? In other words, the income tax I have to pay on the distribution (conversion) will actually be slightly less than the full amount converted because of my partial basis?
3. That's why part 1 of form 8606 needs to be filled out, to calculate your partial basis in the distribution?
I must have missed a step by step instruction in TurboTax or just misunderstood that a rollover IRA is a traditional IRA. Our 8606 forms for 2020 only had part 2 filled out and we paid income tax on the full conversion amounts with no credit for a non-deductible basis.
I sure wish the IRS would just add the term "Rollover IRA" to "Traditional, SEP and Simple". I'm sure I'm not the first to be confused by this.
