Pro-rata calculation - first time converting from Traditional IRA to ROTH IRA

[Intchk]

Hello,

I have two traditional IRA accounts at different mutual fund
companies. First account has 30k (with non-deductable basis
of 10K). Last week, I have converted all 30K to ROTH IRA.
now in ROTH IRA account.

On the 2nd account, it has 50K (No/None non-deductable amount)
If I convert 15K out of this 50K into ROTH IRA next week(12/16/19),
AFter this conversion, I will have 35K (50-15) remaining in the
Traditional IRA at the end of this year.

On these two accounts I have contributed over these years. Not
withdrawn any amount also did not do any conversion to ROTH IRA.
I did filledout/filed form 8606 when contributed to non-deductable
IRA during those years.

I was told when pro-rata calculation done to file 2019 taxes,
Take the non-deductable "basis" and end of this year TOTAL All
Traditional IRA accounts amounts.

To make it simple, let us say, the amounts stayed same on 12/31/2019.

So after converting to ROTH IRA at both mutual fund companies,
I will have 35K in traditional IRA left and rest of the amount
in the ROTH IRA since I converted this month (December 2019).

For the pro-rata formula, then use non-deductable "basis" of 10k, and
TOTAL end of the year 2019 Traditional IRA amount of 35K OR TOTAL
end of the year 2019 Traditional IRA amount is 80K (30K+50K) please??

10K / 35K = 0.28 ( or 28%) of the conerted to ROTH IRA no taxanle, remaining
  amount converetd amout taxable
10K / 80K = 0.125  (or 12%) of the converted amount not taxable. remaining amount
   converetd amout taxable

Thanks in advance for your time and reply/answers!

[Critter]

Fill in the 8606 to get the answer you seek ... or let the program do so for you ... https://www.irs.gov/pub/irs-dft/f8606--dft.pdf

[Intchk]

Excellent! Thanks.

One question, on line #6 of the form asks
"Enter the value of all your traditional IRAs as
of December 31, 2019".  I have an ROTH IRA account
at this mutual fund company from last year already.

Since I will be converting 15K to ROTH IRA from
Traditional IRA next week, so I need to tell mutual
fund company, not to mingled this 15K converted amount
with old/existing ROTH IRA and put in new ROTH IRA account
since I need the end of the year amount from this account
to fill in the form 8606 please or ??

Thanks again!

[Critter]

OK ... the devil is in the details ... READ that line again ... it asks for Year End Value of all your TRADITIONAL IRAs ... at no time does it ask for the ROTH.

[dmertz]

As was explained to you in responses to the essentially identical question that you asked a month ago, the basis in nondeductible traditional IRA contributions does not reside in any particular traditional IRA account, it applies to all of your traditional IRA accounts in aggregate.

With $30K + $15K =$45K converted leaving a year end balance of $35K in traditional IRAs and you have $10k of basis, the nontaxable amount will be 12.5% of the $45K converted:

$45K * $10K / ($45K + $35K) = $5,625 nontaxable, $39,375 taxable and your traditional IRAs will have $4,375 of basis remaining to be distributed with future distributions.

[Critter]

Look at the screenshot above ... line 9 is the total of lines 6+7+8 ... you cannot see line 6 but if you subtract line 8 from line 9 line 6 is obvious.  

[Intchk]

Respectfully, I agree with you. I was aware I need to

include Total all Traditional IRA accounts. Where I converted

30K at that fund company I do not have ROTH IRA from last year.

So I was asking  was, at other fund company I have ROTH IRA

already so not mingled with next week converted amount so

I can use this amount end of the year amount(to include total

Traditional IRAs amounts). That is all.

May be I did not explain properly when I was typing going through

different other issues,... My initial entry I did say: 10K / 80K = 0.125 

(or 12%) of the converted amount not taxable. remaining amount

converted  amount taxable.

Thanks again!

[Intchk]

I agree with you sir!

In my initial entry I had calculated also 12.5% amount not taxable.

I was checking my math was correct and I am missing anything. As others

noted here and at other web sites, I need to pay estimated tax for the converted

amount (taxable amount part ) so I am calculating pay taxes for this quarter, That is all.

Thanks again. I will stop on this pro-rata.