@PAccisano wrote:
Thanks for this information. I guess I need to share a few more details, here's the full timeline.
I started with a Tradition IRA in Vangaurd which I had a balance in. On April 15, I opened a new Roth IRA in Robinhood and contributed the max (or what I thought was the max). A few days later, I converted my Vanguard Trad IRA to Roth, then merged it with the Robinhood Roth IRA. Currently, the only IRA I have a balance in is the Robinhood Roth IRA. I also have a 401k separately, but I assume that's irrelevant.
Since I've already converted one IRA for the 2024 tax year, does that mean I can't do it again?
Conversions aren't limited to one per year.
At this point you have a Roth IRA that contains (1) a contribution from April 15, 2024 that was retroactive for the 2023 tax year, plus (2) amounts converted from a pre-tax IRA. Currently you have zero balance in all pre-tax IRAs combined?
Note that the IRA conversion will be taxable in 2024, conversions are always taxed when they happen, they are not retroactive. And since Roth conversions are taxable, you must have already been planning to pay the tax on the pre-tax portion of the conversion. This is helpful information.
What you will do is ask for a recharacterization of the contribution amount to a traditional IRA. That will actually happen in May 2024, but you can report it on your 2023 tax return. You file an amended 2023 tax return to report the Roth contribution. Turbotax will tell you that it was not eligible/excess and will ask you what you will do. You tell the program you will recharacterize it as a traditional IRA contribution. Turbotax should warn you this is non-deductible based on your circumstances, you say ok. Your amended return will include a copy of form 8606 that documents the basis (non-deductible portion) of your traditional IRA. File the amended return by mail, not e-filed, and write your note on top. (Or, you can try e-filing and write "Filed pursuant to section 301.9100-2" as the reason for the amended return. This is not exactly per IRS instructions but is probably allowable.)
Then in June 2024, convert the traditional IRA to a Roth. If you want to make 2024 backdoor Roth contribution, you can also do that any time, make the non-deductible traditional IRA contribution some time in 2024 and then convert it to the Roth. You can make more than one conversion in a year. The key point is to end December 31, 2024 with zero balance in all traditional IRA accounts.
Then, on your 2024 return, you report all the non-deductible contributions and conversion. The effect of the pro-rate rule in this case is that you will pay income tax on the pre-tax IRA conversion that you already did (and that you expected to pay tax on) and the conversion of non-deductible contributions from traditional IRA to Roth IRA is non-taxable.
