@imbhavik wrote:
Thank you for the confirmation.
I thought all questions covered, but then last one popped up...
When I do backdoor Roth IRA (legal term Roth IRA conversion), I have to convert $6000 which I contributed in 2019 OR $6000 + any earnings happened on $6000 from Jan 2019 till the date when I convert to Roth IRA?
If I have to do $6000 + earnings, then how would we determine earnings?
I did talk to the firm holding my account and they said that I have to determine earnings by myself for conversion. If I were to do recharacterization or excess removal, then they can calculate it for me, but NOT for Traditional IRA to Roth IRA conversion.
[One point to clarify: You originally stated that you could not deduct your Traditional IRA contribution because your MAGI was above $203,000. That is the limit to *contribute* to a *Roth* IRA. The deduction MAGI for a Traditional IRA is $123.000 but ONLY if you are covered by a retirement plan at work (box 13 checked on W-2 form) or a self-employed retirement plan. If not covered but a spouse is covered then the limit is $203.000. If neither spouse is covered then there is no limit.]
Your MAGI of $203,000 would prohibit any direct Roth contribution which would also prohibit a characterization to a Roth so that is not an option as I pointed out above.
If the ONLY money in your Traditional IRA is the $6000 contribution plus any earnings, then when you convert ALL the money in the Traditional IRA to a Roth, however much more than the $6,000 would be the earnings. The earning will be a taxable conversation - there is no need to have to calculate the earnings.
As I pointed out above in "huge pitfall", if the Traditional IRA already has other money in it and/or has a year end value more then zero after the conversion, then the backdoor Roth will not work and only a small amount will not be taxable.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
