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Phobia42
Level 1

Backdoor Roth Conversion - Multiple Years

I forgot to do my backdoor Roth conversion last year.  I had an existing Vanguard Traditional IRA with $1.85 in it.  Last week I contributed $12K (after tax money) from my brokerage account into it, specifying to put $6K in 2020 and $6K in 2021.  A few questions:

 

1)  When I try to convert to Roth IRA, it doesn't let me specify years.  Because I did that when I first contributed, can I convert the whole thing without worrying about exceeding any yearly limits?

2)  If yes above, will the $1.85 matter, or should I specifically convert exactly $12K?

3)  Any tax forms to file?  I believe I've been told I need an 8606.  Any others?

4)  Would I report is as part of my 2020 taxes, or 2021?

5)  Any deadlines I need to know about other than 4/15?

 

Any guidance would be greatly appreciated!

1 Best answer

Accepted Solutions
dmertz
Level 15
Intuit Approved!

Backdoor Roth Conversion - Multiple Years

  1. Any Roth conversion done in 2021 is reportable on your 2021 tax return, not on your 2020 tax return.  Nothing about the Roth conversion goes on your 2020 tax return.  Only the 2020 traditional IRA contribution goes on your 2020 Form 8606 and the resulting $6,000 on line 14 will carry forward to line 2 of your 2021 Form 8606 to be combined with your $6,000 contribution for 2021 and where the calculation of the taxable amount of your 2021 Roth conversion will be calculated.
  2. If you convert $12,001.85 in 2021, that's what will go on line 8 of your 2021 Form 8606.
  3. Your 2020 Tax return must include Form 8606 to report the $6,000 nondeductible contribution that you made for 2020.
  4. See above.
  5. No.  You've already made your 2020 contribution before the 4/15/2021 deadline.

View solution in original post

7 Replies
dmertz
Level 15
Intuit Approved!

Backdoor Roth Conversion - Multiple Years

  1. Any Roth conversion done in 2021 is reportable on your 2021 tax return, not on your 2020 tax return.  Nothing about the Roth conversion goes on your 2020 tax return.  Only the 2020 traditional IRA contribution goes on your 2020 Form 8606 and the resulting $6,000 on line 14 will carry forward to line 2 of your 2021 Form 8606 to be combined with your $6,000 contribution for 2021 and where the calculation of the taxable amount of your 2021 Roth conversion will be calculated.
  2. If you convert $12,001.85 in 2021, that's what will go on line 8 of your 2021 Form 8606.
  3. Your 2020 Tax return must include Form 8606 to report the $6,000 nondeductible contribution that you made for 2020.
  4. See above.
  5. No.  You've already made your 2020 contribution before the 4/15/2021 deadline.

View solution in original post

Phobia42
Level 1

Backdoor Roth Conversion - Multiple Years

Thank you for the detailed response!  So if I go ahead and convert the whole thing now, and report as you outlined, I should be safe from any kind of over-contribution penalties or anything, right?

dmertz
Level 15

Backdoor Roth Conversion - Multiple Years

Right.  There is no limitation on the amount that you are permitted to convert.

micky-mack
New Member

Backdoor Roth Conversion - Multiple Years

Does your bullet point #3 of "Your 2020 Tax return must include Form 8606 to report the $6,000 nondeductible contribution that you made for 2020" mean that people in a similar situation as the OP (contributed March 2020 but then failed to convert until March 2021) should fill out the 8606 as normal, or does having forgotten to convert for a full year mean that the 8606 filed in 2021 for the 2020 year mean that it looks different than a "typical" 8606 for which one can find walk-throughs on Youtube or blogs?

dmertz
Level 15

Backdoor Roth Conversion - Multiple Years

The timing of the Roth conversion just determines which Form 8606 reports the Roth conversion.  If the Roth conversion occurred in 2020, both the 2020 nondeductible traditional IRA contribution and the 2020 Roth conversion go on the 2020 Form 8606..  If the Roth conversion occurs in 2021, the nondeductible traditional IRA contribution goes on the 2020 Form 8606, and the Roth conversion goes on the 2021 Form 8606.  Basis carries forward from line 14 of the 2020 Form 8606 to line 2 of the 2021 Form 8606.

 

People get confused because they term "backdoor Roth" makes them think that it's is some sort of combined transaction.  It's not.  It's two transactions, a nondeductible traditional IRA contribution for some year and a separate Roth conversion in some year.  Depending on the timing, both might appear on the same Form 8606 or not.  Each transaction must be entered into TurboTax without regard for the other.  (The traditional IRA contribution might be the result of a recharacterized Roth IRA contribution, but that's taken case of in TurboTax during the entry of the original Roth contribution, with the result being reported as a traditional IRA contribution, still entirely separate from any Roth conversion.)

tax dunce
New Member

Backdoor Roth Conversion - Multiple Years

I contributed $6000 each to both my own traditional IRA and a spousal traditional IRA in 2020. I converted my total to Roth IRA (backdoor Roth IRA) in 2020 but my wife's traditional IRA wasn't converted to Roth until 2021. I think I filled out the turbotax questions correctly but is there a way to view the 8606 tax forms for both my contribution and my wife's so I can make sure they are filled out correctly before submitting? I am using the online version of Turbotax. Also, my understanding is my form 8606 will include both the contribution and the conversion but my wife's will only include the contribution since she didn't convert until 2021, so it won't be reported until her 2021 8606 form. Is this correct? I just want to make sure these forms are filled out correctly so I don't incorrectly get taxed for my backdoor Roth IRA and my wife's. Thanks!

dmertz
Level 15

Backdoor Roth Conversion - Multiple Years

You are correct.

 

To view the Forms 8606 you'll need to pay for TurboTax and then you'll be able to download the pdf of your tax return before filing.

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