Roth Conversion

[sazizo]

I made a non-deductible contribution to a traditional IRA in 2018; that contribution was 100% of the balance in that IRA.   Early in 2019 I converted that to a ROTH IRA, expecting that I would pay no tax as it was 100% of the value of the Traditional IRA (and no real change in value from the initial contribution).   However, later in 2019 I rolled-over my 401k from a previous employer into a traditional IRA.    Is the basis for the conversion earlier in 2019 what it would be at the time I did the conversion (effectively 100%), or is it the percentage of total Traditional IRA balances at the end of 2019 given the larger balance that exists because of the 401k rollover?    Thanks.

[macuser_22]

Unfortunately you discovered one of the pitfalls of the so called "Backdoor Roth".

This so-called “back-door Roth” method ONLY works if you have NO OTHER Traditional IRA accounts. If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself. Only if you started with NO Traditional, SEP & SIMPLE IRA and ended up with a zero amount in ALL Traditional, SEP & SIMPLE IRA accounts will this Roth conversion not be taxable.

The basis must ALWAYS be prorated between the distribution and the total years end value.   If the 401(K) rollover was large then only a small part of the conversion will be not taxable.

[sazizo]

Thanks for your response.   The Roth conversion took place in January of 2019, is it possible to apply that for my 2018 tax year as it was before April?  I could then amend my 2018 tax return to include it then instead of 2019.   Thanks

[dmertz]

If the distribution from the traditional IRA that was converted to Roth occurred in 2019, reported on a 2019 Form 1099-R, it's 2019 income reportable on your 2019 tax return; it is not permitted to be reported on your 2018 tax return

[macuser_22]

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@sazizo wrote:

Thanks for your response.   The Roth conversion took place in January of 2019, is it possible to apply that for my 2018 tax year as it was before April?  I could then amend my 2018 tax return to include it then instead of 2019.   Thanks

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Not possible.   Conversions after December 31, 2018 are 2019 conversions.   If reported on a 2019 1099-R then it goes on your 2019 tax return.

The April 15, 2019 due date is a common misconception.  You are allowed to make a 2018 IRA *contribution* up to the due date of the return, but that does not apply to IRA distributions (and a conversion is a distribution that was converted), that can only be reported in the year of the distribution.