Hello,
So, this is my first time doing backdoor Roth IRA, and honestly and IRA.
In June of 2024 I did a $7000 contribution to traditional IRA. Due to my income, this was not a deductible contribution. A week later I did a conversion to Roth IRA for $7000.
Mind you, the initial 7k in the tradition IRA earned little bit of interest that I did not convert (this value as of 12/31/2024 was $9.75 will get to this point later)
I first went thru the process of entering my traditional IRA contribution, which of course Turbo Tax told me does not qualify for deduction based on my income.
Next I entered my 1099-R form and I entered all the information. One of the questions that confused me a little bit was what the amount was in my traditional IRA as of 12/31/2024. So I entered the amount $9.75 I mentioned above. There are two other fields I did not know what to do with (Outstanding rollover and outstanding recharacterizations). Do I need to enter this $9.75 as any of those or leave it blank?
This pretty much did everything and wrapped up the process. At least I think. So, I am just trying to confirm if I did everything correctly, or is there anything else I am missing since this is my first time doing this.
Thank you!
you had nothing "outstanding" so leave those blank.
You should be seeing $8 on Line 14 and 15c of Form 8606.
That is normal.
You must keep Form 8606 for your own records.
Here's some info you may find useful going forward on How to Enter a Back-Door Roth Conversion and Form 8606, which you continue to file until your basis is depleted.
Also a detailed FAQ on Excess Roth IRA Contributions.
Sorry coming back to this. When I enter the 1099-R, the question I mentioned that asks "Tell us the value of your Traditional IRA" the first box is "Value of your Traditional IRA as of Dec 31, 2024" this is where I put $9.75 which it rounded to $10. I left "Outstanding Rollovers" and "Outstanding recharacterization" empty. However, now it thinks that my basis is $6990 as it is not seeing that this was earnings. Which is the part that is confusing me.
It should see I added 7k to traditional, converted the 7k to Roth, and the $10 I had left at the end of the year is earnings that happened before I did the conversion, which honestly I should have converted everything.
The 8606 has lines 13 and 17 as $6990. Maybe I need to leave that 12/31/24 at $0? Because the sub question under "Value of your Traditional IRA as of Dec 31, 2024" says "Enter any outstanding 2024 rollovers or recharacterizations that were not completed until 2025" then it asks for value as of 12/31/24 and then the other 2 fields.
Sorry, hope all that makes sense. 🙂 Thank you for your help!
Yes, you will enter $9.75 for the "Value of your Traditional IRA as of Dec 31, 2024" and leave the other fields blank.
The calculations are correct. You had a mix of pre-tax and after-tax funds in your traditional IRA, since you had earnings in your traditional IRA. Therefore the pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part. You can see the remaining basis on line 14 of Form 8606, this basis will be carried forward. Therefore, each distribution/conversion in the future will have a taxable and nontaxable part until the basis is all used.
Yes, next time you can convert the full amount.