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quangxvu
Returning Member

Backdoor Roth Conversion mid year, but had a balance in Tradtiional IRA at end of year

I did a backdoor Roth conversion mid year 2020 for dollars that were contributed in 2019. In December of 2020 I made another non-deductible contribution to my Traditional IRA with the intent to convert it right away. I forgot to convert it and now we're in 2021. How does the pro-rata rule affect me now if I convert my December 2020 contribution? I plan to do another backdoor roth conversion in 2021 which means I'll be converting 120000, 6k from December 2020 and 6k from a contribution made in 2021.

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1 Reply
DanaB27
Expert Alumni

Backdoor Roth Conversion mid year, but had a balance in Tradtiional IRA at end of year

If you only had made nondeductible contributions to the traditional IRA then only the earnings will be taxable when you convert it to a Roth. Each conversion will have an amount allocated to the nondeductible part and the earning part. Since you are planning to convert all funds in 2021, the 12k will be not included in the taxable income but any earnings will be included.

 

Please follow these steps to enter your nondeductible contribution on your 2020 return (you should have done this on your 2019 return as well to create Form 8606):

 

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top right and type “IRA contributions”
  3. Click on “Jump to IRA contributions"
  4. Select “traditional IRA
  5. Answer “No” to “Is This a Repayment of a Retirement Distribution?
  6. Enter the amount you contributed $6,000
  7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
  8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” since you had nondeductible contribution in 2019
  9. Enter the basis in the Traditional IRA.
  10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

 

To enter the 1099-R distribution/conversion 2020: 

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top right and type “1099-R”
  3. Click on “Jump to 1099-R”
  4. Click "Continue" and enter the information from your 1099-R
  5. 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
  6. On the "Your 1099-R Entries" screen click "continue"
  7. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
  8. Answer the questions about the basis

You will repeat these steps on your 2021 return when you convert the 12k.

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