Roth and backdoor roth deadline

Forum|Forum|4 years ago
March 9, 2022
2 replies
4 views

Hi, this is a big confusion to me but I read roth contribution deadline is filing deadline (4/15) but backdoor roth deadline is end of the year 12/31? Is this correct. Fidelity told me backdoor roth is also 4/15 but I'm getting mixed info elsewhere.

I got married and no longer qualify for roth even though I did roth in 2021. Im wondering if it is too late to convert the roth to traditional, and backdoor it again to have it count towards 2021.. Thanks

fanfare

Level 15

To recharacterize a contribution, you must generally
have the contribution transferred from the first IRA (the
one to which it was made) to the second IRA in a
trustee-to-trustee transfer. If the transfer is made by the
due date (including extensions) for your tax return for the
tax year for which the contribution was made, you can
elect to treat the contribution as having been originally
made to the second IRA instead of to the first IRA.

Then (important) make the non-deductible election on your tax return for that amount now in the second IRA (Traditional).

fanfare

Level 15

CAUTION: Backdoor Roth conversion only works if you currently have no value in Traditional IRAs.

DanaB27

Level 15

You have until April 18th, 2022 to make contributions for 2021.

You have to recharacterize a 2021 contribution by the due date for filing your 2021 tax return (including extensions).

You can convert a traditional IRA to Roth IRA anytime.

A backdoor Roth has two parts the contribution and the conversion. It is best to do it in one year to avoid gains but can be done over two years too (contribute in 2021 and convert in 2022).

If you decide to recharacterize your Roth contribution then you will enter the recharacterization when you enter the contribution to the Roth IRA:

Login to your TurboTax Account
Click on "Search" on the top right and type “IRA contributions”
Click on “Jump to IRA contributions"
Select “Roth IRA”
Answer “No” to “Is This a Repayment of a Retirement Distribution
Enter the Roth contribution amount
Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (since you are thinking about doing a backdoor Roth. If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible)

You will get Form 1099-R for the recharacterization with code R-Recharacterized IRA contribution made for 2021 and this belongs on the 2021 return. But a 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore the 1099-R with code R when you get it in 2023. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

You will have a basis on line 14 of your 2021 Form 8606 that you will enter next year on your 2022 tax return if you convert the traditional IRA to Roth IRA in 2022.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

Katerinablondy

Level 2

Thanks for this post. I am just about ready to file but we are confused on how to report it. We contributed before April 2021 for 2020, and now we are getting double reporting for 2021. How do we indicate that half of the contribution is for 2020?

DanaB27

Level 15

On your 2020 return, you will have to report the nondeductible contribution and then you can enter this basis (nondeductible contribution) on your 2021 return. Please see How do I amend my 2020 return? and the steps below.

If you made a nondeductible contribution for 2021 you will enter it on your 2021 return.

To enter the nondeductible contribution to the traditional IRA:

Login to your TurboTax Account
Click on "Search" on the top right and type “IRA contributions”
Click on “Jump to IRA contributions"
Select “traditional IRA”
Answer “No” to “Is This a Repayment of a Retirement Distribution?”
Enter the amount you contributed
Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contributions before this tax year.
If you had a basis in the Traditional IRA before then enter the amount from your 2020 Form 8606 line 14.
On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible).

To enter the 1099-R distribution/conversion:

Click on "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Click "Continue" and enter the information from your 1099-R
Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
On the "Your 1099-R Entries" screen click "continue"
Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs