Backdoor Roth Conversion - Multiple Years

[Phobia42]

I forgot to do my backdoor Roth conversion last year.  I had an existing Vanguard Traditional IRA with $1.85 in it.  Last week I contributed $12K (after tax money) from my brokerage account into it, specifying to put $6K in 2020 and $6K in 2021.  A few questions:

1)  When I try to convert to Roth IRA, it doesn't let me specify years.  Because I did that when I first contributed, can I convert the whole thing without worrying about exceeding any yearly limits?

2)  If yes above, will the $1.85 matter, or should I specifically convert exactly $12K?

3)  Any tax forms to file?  I believe I've been told I need an 8606.  Any others?

4)  Would I report is as part of my 2020 taxes, or 2021?

5)  Any deadlines I need to know about other than 4/15?

Any guidance would be greatly appreciated!

[dmertz · Accepted solution]

1. Any Roth conversion done in 2021 is reportable on your 2021 tax return, not on your 2020 tax return.  Nothing about the Roth conversion goes on your 2020 tax return.  Only the 2020 traditional IRA contribution goes on your 2020 Form 8606 and the resulting $6,000 on line 14 will carry forward to line 2 of your 2021 Form 8606 to be combined with your $6,000 contribution for 2021 and where the calculation of the taxable amount of your 2021 Roth conversion will be calculated.
2. If you convert $12,001.85 in 2021, that's what will go on line 8 of your 2021 Form 8606.
3. Your 2020 Tax return must include Form 8606 to report the $6,000 nondeductible contribution that you made for 2020.
4. See above.
5. No.  You've already made your 2020 contribution before the 4/15/2021 deadline.

[Phobia42]

Thank you for the detailed response!  So if I go ahead and convert the whole thing now, and report as you outlined, I should be safe from any kind of over-contribution penalties or anything, right?

[dmertz]

Right.  There is no limitation on the amount that you are permitted to convert.

[micky-mack]

Does your bullet point #3 of "Your 2020 Tax return must include Form 8606 to report the $6,000 nondeductible contribution that you made for 2020" mean that people in a similar situation as the OP (contributed March 2020 but then failed to convert until March 2021) should fill out the 8606 as normal, or does having forgotten to convert for a full year mean that the 8606 filed in 2021 for the 2020 year mean that it looks different than a "typical" 8606 for which one can find walk-throughs on Youtube or blogs?

[dmertz]

The timing of the Roth conversion just determines which Form 8606 reports the Roth conversion.  If the Roth conversion occurred in 2020, both the 2020 nondeductible traditional IRA contribution and the 2020 Roth conversion go on the 2020 Form 8606..  If the Roth conversion occurs in 2021, the nondeductible traditional IRA contribution goes on the 2020 Form 8606, and the Roth conversion goes on the 2021 Form 8606.  Basis carries forward from line 14 of the 2020 Form 8606 to line 2 of the 2021 Form 8606.

People get confused because they term "backdoor Roth" makes them think that it's is some sort of combined transaction.  It's not.  It's two transactions, a nondeductible traditional IRA contribution for some year and a separate Roth conversion in some year.  Depending on the timing, both might appear on the same Form 8606 or not.  Each transaction must be entered into TurboTax without regard for the other.  (The traditional IRA contribution might be the result of a recharacterized Roth IRA contribution, but that's taken case of in TurboTax during the entry of the original Roth contribution, with the result being reported as a traditional IRA contribution, still entirely separate from any Roth conversion.)

[tax dunce]

I contributed $6000 each to both my own traditional IRA and a spousal traditional IRA in 2020. I converted my total to Roth IRA (backdoor Roth IRA) in 2020 but my wife's traditional IRA wasn't converted to Roth until 2021. I think I filled out the turbotax questions correctly but is there a way to view the 8606 tax forms for both my contribution and my wife's so I can make sure they are filled out correctly before submitting? I am using the online version of Turbotax. Also, my understanding is my form 8606 will include both the contribution and the conversion but my wife's will only include the contribution since she didn't convert until 2021, so it won't be reported until her 2021 8606 form. Is this correct? I just want to make sure these forms are filled out correctly so I don't incorrectly get taxed for my backdoor Roth IRA and my wife's. Thanks!

[dmertz]

You are correct.

To view the Forms 8606 you'll need to pay for TurboTax and then you'll be able to download the pdf of your tax return before filing.

[DBMC987]

I did a back door roth in Feb 2022 ($6,000 for 2021 taxes, so i added $6,000 in an IRA and moved it to a Roth IRA the next day) and did a back door roth in Dec 2022 ($6,000 for 2022 taxes, so i added $6,000 in an IRA and moved it to a Roth IRA the next day), so I have a 1099-R for 2022 that shows $12,000 contribution. I can't get anything to work out right without charge me taxes but not even sure if  i only need to do something for half of the 1099-R, so $6,000 instead of the full $12,000. I'm trying to understand what 8606 should have looked like in 2021, which i might have gotten wrong.  And what it should look like for 2022.  Thanks for any thoughts.

[dmertz]

The 2021 Form 8606 should have had $6,000 on line 1, 3, 4 and 14.  The amount on line 14 carries forward to line 2 of your 2022 Form 8606 were it gets added to the $6,000 on line 1 for a total of $12,000 on line 3.  $12,000 should also be present on line 5.

[DBMC987]

Great, thank you very much.

[AbrahamT]

At thre end of the day, you should have 6,000 on 1040 line 4a with 0 on line 4b. with nothing showing in Schedule 1 Part 2 Line 20.

[dmertz]

@DBMC987 will have $12,000 on line 4a, not $6,000, having converted $12,000 in 2022.