2019 was my first year contributing to an IRA. Through Fidelity I am contributing to a backdoor Roth IRA. Mid 2019 I created a Traditional IRA and created a Roth IRA. I contributed exactly $6,000 into my Traditional IRA and then converted all $6,000 into a Roth IRA.
** For some reason one of my dividends, before I turned on DRIP, put $2.36 into my Traditional IRA**
I believe I am reporting everything correctly but I am receiving the two warning errors.
"Income Too High To Deduct IRA Contribution"
"Your Roth Contribution Was Too High"
$6,000
$6,000
x
] Taxable amount not determined [x
] Total Distribution7 - Select Codes:
2 - Early Distribution
x
] IRA/SEP/SIMPLE box is checked on my copy of the 1099-R
- What did you do with the money? [
x
] I converted all of this money to a Roth IRA Account.- Any Nondeductible Contributions to Your IRA? [
x
] Yes, I made and tracked nondeductible.$2.36
(because that dividend got put there)$6,000
(since I converted it all)[
x
] Traditional[
x
] Roth> Tell us how much you contributed to Traditional IRA:
$6,000
> Switched, re characterized over to a Roth IRA?
NO
NO
$2.36
(cause of the dividend)YES
$6,000
> Tell us the value of your Roth IRA as of December 31, 2019:
$6,000
- I receive the MAGI too high notice.
- I receive the Roth Contribution was too high. I contributed $6k to Roth and $6k to Traditional.
- You currently have a penalty.For some reason my Federal Refund dropped ~$400 after all this.Additional Notes for extreme detail:For Fidelity I actual have 3 Accounts:
Account 1: Traditional IRA (Received a 1099-R and a 5498)
Account 2: Roth IRA (Received a 5498)
Account 3: Fidelity GO (professionally managed Roth IRA, NO documents)
When I first created the Trad/Roth IRA accounts, it wanted me to self manage my Roth account. I asked Fidelity and they said if I wanted them to manage my Roth, I would have to create a 3rd account (the Fidelity GO account). So I technically transfer money into my Traditional IRA, convert to my Roth IRA, then transfer it to my Fidelity GO Roth account.
Account 1: Traditional IRA 5498: IRA Contribution:
$6,000
$2.36
Account 2: Roth IRA 5498 (the first Roth Account I use BEFORE I trade it to the Fidelity GO):
Roth IRA conversion amount:
$6,000
$0.00
NO tax papers for Fidelity GO Roth because "Your Fidelity Go account will not receive a tax form because the funds were merely shifted from one Roth to another in our system. this transfer is not a tax event that would generate a tax form."
> Roth IRA Contributions
> Did you make a Roth IRA contribution for 2019?
YES
$6,000
This was your mistake. You made no regular Roth IRA contributions.
Thank you for the quick response. That fixed it. Your help was very much appreciated.
Hi! My earned income from w-2 form is one number in wages and income, and a different number in deductions and credits. Why? Bill B.
It depends. It helps to think of earned income as money you work for, as opposed to passive income like interest, dividends, or rental income if you're not in the business of renting out properties.
The IRS defines earned income as:
The IRS also gives you the option of treating nontaxable combat pay (code Q in box 12 of your W-2) as earned income for the Earned Income Credit (EIC).
The IRS defines unearned income as:
If you have more questions, please provide more clarification as to what types of income are on your tax return, and exactly where you see it under deductions and credits.
Thanks! My wife and I have an earned income of $9355. When I get to the deductions and credits, I am told that our earned income is $6857, and that we have over paid into our Roth IRA's. I can not find the deductions that would bring $9355 down to $6857.
Please clarify: on your W-2, Box 12, did you enter anything? This would be under Deductions & Credits as regular personal IRA contributions items shown in box 12 of your W-2? This would be the area that would affect the Roth deductions.