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cm183
New Member

Question regarding total basis for IRA on form 8606

Since 2014, I have been making nondeductible contributions to traditional IRA (5500 each year), and immediately converting to Roth IRA (backdoor rollover).  I made my contribution for 2016 in early 2017 and converted it to Roth, so the balance in my traditional IRA is $0.  However, for form 8606, is my total basis $16500 in traditional IRA as they were all nondeductible contributions?  Or is it $0 since all the fund have been converted to Roth IRA shortly after contribution?  How do I manually edit Form 8606 as Turbotax doesn't seem to be reflecting the changes I made?  My total basis should be $16500 but TurboTax has it at $11000.
3 Replies
dmertz
Level 15

Question regarding total basis for IRA on form 8606

You cannot manually edit From 8606.  Given the vagueness of the timing of these transactions, it's not clear how much basis was carried into 2016 to appear on 2016 Form 8606 line 2, but it seems that it should be either $0 or $5,500 and would be applied to any Roth conversion you did in 2016.

To provided a detailed answer, details are needed as to the year *for* which each nondeductible contribution was made, the year *in* which each contribution was made, the amount of the contribution, the amount and year *in* which each Roth conversion was performed.  Without that, I can only say that line 14 of your 2016 Form 8606 should show $5,500 to be carried forward to line 2 of your 2017 Form 8606 to be applied to the Roth conversion you have already performed in 2017.
cm183
New Member

Question regarding total basis for IRA on form 8606

Thanks for your help.  In Dec 2014, I contributed $5500 nondeductible fund to traditional IRA, then converted it to Roth IRA immediately.  In Feb 2016, I contributed $5500 to traditional IRA for tax year 2015 and converted it to Roth IRA immediately after.  In Feb 2017, I contributed $5500 to traditional IRA for year 2016 and also converted it over to Roth IRA immediately after.  I also contributed another $5500 at the same time for year 2017 and also immediately converted that to Roth IRA.  I think I figured it out.

For year 2014, line 1 would be $5500 and line 2 is 0.  line 14 total basis is $0 (since I convert to Roth in the same tax year as contribution).
For year 2015, line 1 would be $5500, line 2 is 0, line 14 total basis is $5500 (since I did not convert to Roth until 2016).
For year 2016, line 1 would be $5500, line 2 is $5500, line 14 total basis is $5500 (since I did not convert to Roth until 2017).
for year 2017, line 1 would be $5500, line 2 is $5500, line 14 total basis is $0 (since I convert to Roth in the same tax year as contribution).

Does that sound right?  Pretty much if I contributed non-deductible money to traditional IRA for a tax year, say for example 2014 during that year and immediately convert to Roth IRA, my basis in traditional IRA should be $0.  But if I contributed money for prior tax year, for example I contributed $5500 in 2017 for 2016 tax year and didn't do the conversion until 2017, I should have $5500 total basis for tax year 2016.

Is there any tax penalty if I made contribution for tax year 2016 and 2017 in month of Feb 2017 for total amount of $11000 ($5500 for each year), and converted that full amount to Roth IRA shortly after.  So I'm essentially contributing only $5500 for tax year 2017 but will get a 1099-R for traditional IRA $11000 distribution due to conversion of 2016 and 2017 year occurring in 2017.

Thanks so much for your help!
dmertz
Level 15

Question regarding total basis for IRA on form 8606

Answered in the comments.  Yes, you have described the From 8606 details for each year correctly.  There are no penalties.

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