Retirement tax questions

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@imbhavik wrote:

HI,

 

Sorry for the late response as I was out..

 

1. In this case, when I convert fund from Traditional IRA to Roth IRA and its considered as Backdoor Roth IRA or Rollover Roth IRA and NOT recategorization of Traditional IRA to Roth IRA, then when I am filing the taxes for 2019, how do I show rollover to Roth IRA in tax return for 2019? OR do I really need to show anything?

 

2. I read in your response as well as in other post online somewhere that Once I have contributed to Traditional IRA, I have to immediately rollover to Roth IRA to be considered as Backdoor Roth IRA. What is the duration required for the term "Immediately"? Is there any time limit in which I have to rollover?

 

FYI... I had contributed in Jan 2019 for 2019 Traditional IRA and now it is Feb 2020.

 

Thanks.

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1) Since you make a 2019 Traditional IRA contribution that is not deductible, you enter that contribution  into the IRA contribution section and if the interview question asks if you want to deduct it mark it non-deductible (that question will not come up if your MAGI prevents a deduction).  That will automatically produce a 2019 8606 form with the non deductible amount on line 1.

If you had the Traditional IRA converted to a Roth before Dec 31, 2019 the you should have a 2019 1099-R to enter on your 2019 tax return to report it.

If you are doing the conversion in 2020 the  you will report the conversion and 2020 1099-R next year on your 2020 tax return

2) "Immediately"  just means that any earnings that the contribution earns will be taxable when converted.  There is no time limit as long as you understand that there could be some taxable earning converted if there are earnings. 

(Most people doing a true backdoor Roth conversions make the non-deductible contribution and then do the conversion at the same time with the account trustee so there can be no earnings, but you can wait as long as you want.)