Hi everyone! I have a question about filing our Form 8606 for non-deductible IRA contributions. I currently perform the backdoor Roth conversion and notice an 8606 has not been filed by my tax person for the last 1-2 years. I am now completing the past 8606 and this year's on my own. I have 2 questions
Question 1) I have made contributions and conversions of $6K to the Roth in the new year (e.g. Jan 2021 - April 2021) for the Tax Year 2020. On 2020 Form 8606 should I simply fill 8606 Part 1 questions 1-3 and 14? I inserted:
Line 1 = $6K, Line 2 = 0, Line 3 = $6K, Line 14 = $6K
I am interpreting the question "In 2020, did you take a distribution from traditional, SEP, or SIMPLE IRAs, or make a Roth IRA conversion?" as referring to the year 2020 and not Tax Year 2020, so I believe the answer is No in my case.
Question 2) In the following I did the same thing where I made a $6K contribution and conversion to Roth for Tax Year 2021 in Jan 2022 - April 2022. What would be the total basis on 2021 Form 8606 Part 1 question 2? Should this be the $6K that was previously contributed for Tax Year 2020 in 2021? In this case I would file out the entire Part 1 when asked "In 2021, did you take a distribution from traditional, SEP, or SIMPLE IRAs, or make a Roth IRA conversion?" in my case Yes.
Question 1. Yes, that is correct, lines 1, 3, and 14 will be $6,000 since you didn't make a conversion in 2020.
Question 2. Line 2 would have the basis of $6,000 from your 2020 Form 8606 line 14. Yes, you will answer "Yes" to "In 2021, did you take a distribution from traditional, SEP, or SIMPLE IRAs, or make a Roth IRA conversion?"
Your 2021 Form 8606 should have $6,000 on lines 1 and 2. $12,000 on line 3. $6,000 on line 4 and $6,000 on line 5. Please see Reporting your nontaxable distribution on Form 8606 for additional instructions to complete Part I.
Thanks a lot for the information. Two follow-up questions I have are
Question 1) Would the total basis includes funds that I would have contributed or rolled over directly to a Roth IRA prior to 2020? For example, if I directly contributed $6,000 when I was under the income limit in the past and converted say $1K (pretax) from traditional to Roth at some other point should this $6,000+$1,000 be added to any of the total basis sections in a following Tax Years? I know form 8606 instructions mention a form 8606 is not needed for regular Roth contributions. I want to make sure I'm capturing the basis correctly for 2020,2021, and 2022 8606.
Question 2) When TurboTax for Tax Year 2022 asks "total basis as of December 31, 2021" would it just be only the amounts I've contributed in 2020 and 2021, or should it include direct contributions made in any years prior to those even if an form 8606 was not need?
Thank you in advance!
Q1 No, your basis is only the nondeductible traditional IRA (after-tax) contributions that are left in the traditional IRA.
Q2 When TurboTax for Tax Year 2022 asks "total basis as of December 31, 2021" you would generally enter the amount listed on your 2021 Form 8606 line 14 (nondeductible traditional IRA contributions). Please see line 2 instructions for details.