Just want to be sure I understand. in early 2016 y...
Level 9

Retirement tax questions

Just want to be sure I understand.
in early 2016 you opened a traditional IRA and funded it with after-tax dollars
in early 2016 you converted that traditional IRA to a Roth IRA
in early 2017 you received a 2016 1099-R for the conversion amount, which you reported including a 8606 in 2016 [edited]

If so,

You need to include a 8606 for any year you make non-deductible traditional IRA contributions (to track your basis in Part I) or Roth conversions (Part II). If neither of those things happened in 2015 (or some other conditions (see below) that don't seem to apply), then you didn't need to file a 2015 8606.

The 2016 8606 should show the non-deductible trad ira contributions and should calculate the taxable amount of the conversion by factoring in those amounts.

If you used up all your traditional IRA basis in the conversion you probably won't have to fine an 8606 unless you do certain withdraws, make more non-deductible trad ira contribution, or more conversions.

For the most part TT is using the end of year FMV of IRAs to calculate how much a traditional IRA distribution is taxable and how much is a return of basis (non-deductible contributions). The basis does not come out first (that would be too good), but rather it is  $ out x (basis at beginning of year / FMV at beginning of year). So it uses the 12/31 value for that calculation. It also computes the new basis for the next year on the 8606 and uses that in the next year.

For more details see "who must file"

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