- You contribute 7k to traditional IRA as non-deductible and convert that 7k to ROTH.
- Answer to this question will depend on your overall pre-tax and after tax amount in an IRA account as my colleague SwapnaM mentioned. In a perfect world, there should not be any tax. but the real world can be a little different. It is important to remember that Pro-rata rules apply not only to traditional IRA but also to SEP and SIMPLE IRA.
So when you convert above 7k to ROTH, the broker will issue a 1099-R. When you enter that 1099-R into TurboTax, TurboTax will ask you the total value of the IRA as of Dec 31st. That question is not only for this particular account (Single account) but it is about all your Traditional IRA, SEP and SIMPLE IRA balances. The IRS does not allow you to pick and choose which account you want this transfer to apply. They want you to take into account your total balance across multiple accounts and then apply the Pro-rata rule based on pre-tax and after tax ratio.
I hope this information was helpful!
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