As I write this, I now second guess my definitions -- in my understanding
-- IRA Rollover is a non-taxable event. In my case, $6500 contributed in 2023 to a traditional IRA with post-tax dollars being "rolled over" from the traditional to Roth IRA
-- IRA conversion is a taxable event. In my case, $2000 from pre-tax contributions made years prior that existed in the traditional IRA prior to the 2023 contribution that were then transferred from a Traditional IRA to a Roth IRA.
-- Looking up IRA basis is defined as post-tax dollars existing in the IRA. I was using this definition incorrectly, as was thinking in terms of investments as the "cost basis" or really as the existing value of the IRA.
Or is this understanding incorrect?
For your questions:
your prior years basis before contribution was $2,000 ?
-- The basis of the IRA in terms of post-taxed dollars in the account is $0. The value of the tradition IRA from pre-taxed dollars was $2000. To explain more -- in 2019 I had a 403b that I rolled over to a Traditional IRA in 2020 when I left that job. So all money in the traditional IRA before 2033 are pre-taxed contributions. I did nothing with this account until 2023. In 2023, I wanted to backdoor Roth since I am ineligible for pre-tax contributions to a traditional IRA. The value of the traditional IRA as the time of moving to a Roth, not including the post-tax $6500 contribution made in 2023, was $2000.
What was the amount you converted to Roth?
-- In total $8500 was sent from the traditional IRA to the Roth IRA, with a breakdown of $2000 pre-tax that was already in the account and $6500 post-tax contribution that was made in 2023, shortly before the Traditional to Roth move. In summary, $2000 was converted and $6500 was rolled over.
Why do you think the basis of $2,000 is taxable amount after your actions ?
-- So I incorrectly termed the $2000 as a basis if this is considered as post-tax dollars. The basis is in this definition is really $0.
" then tell turbotax that I did a combination of rolling over and converting."
Why?
-- I am considering the $2000 pre-tax as a conversion of Tradition to Roth, and the $6500 post-tax 2023 contribution as a rollover
