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"
So this is what I did....
Federal Taxes
> Wages & Income
> Retirement Plans & Social Security - IRA, 401(k), Pension Plan Withdrawals
Fidelity auto populated this for me.
1- Gross Distribution: $6,000
2a - Taxable Amount: $6,000
2b - Check Boxes [x] Taxable amount not determined [x] Total Distribution
7 - 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.
- Value of Traditional IRA on Dec 31, 2019? $2.36 (because that dividend got put there)
- Tell us the value of your Roth IRA as of December 31, 2019: $6,000 (since I converted it all)
Deductions & Credits
> Retirements & Investments - Traditional & Roth IRA Contributions
> Select the kind of IRA(s) you own or will contribute to for 2019.
[x] Traditional
[x] Roth
> Tell us how much you contributed to Traditional IRA: $6,000
> Switched, re characterized over to a Roth IRA? NO
> Any nondeductible contributions prior to 2018? NO
> Tell us the value of all your Traditional IRA Accounts: $2.36 (cause of the dividend)
> Roth IRA Contributions
> Did you make a Roth IRA contribution for 2019? YES
> Enter Roth IRA contributions, even if transferred or re characterized: $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
Fair Market Value of Account: $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
Fair Market Value of account: $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."
