All,
Need some help on the Roth and backdoor Roth IRA!
I was stupid enough to make mistake twice in a row therefore there're two questions.
In 2020, when our income was below the Roth IRA threshold of 196,000, we put 6,000 each in our IRA account. But I realized today that I didn't fill the 8606 form. How do I resubmit it? Do I just send the from itself or need to redo the entire 2020 tax.
In 2021, we can no longer contribute Roth so we did the backdoor IRA. I accidentally put the incorrect amount on form 8606. How do I amend that? Do I need to do 8606x?
Thank you very much!
You don't need to file a Form 8606 for a contribution to a Roth IRA. It's a good idea to enter the information in TurboTax in case you take a distribution before age 59 1/2 and need to know the amount of your contributions (basis).
If your backdoor Roth was a non-taxable event, then won't owe any additional tax. You can complete a new Form 8606 showing the revised information and file it with Form 1040-X. Your Form 1040-X won't show any changes to your return. Just indicate in the reason for amending your return is to submit a revised Form 8606. If you have traditional IRAs that caused a portion of your backdoor Roth to be taxable, then you're 1040-X will show changes and result in additional income tax being owed. This will be the case for your state return, if your state has a personal income tax.
Thanks DavidD66!
For FY2020, I put down 1,000 each on the 8606 form but later forgot to do the backdoor IRA. If I understand 8606 correctly, it will make my future earning on the 1,000 non-taxable if I reported it. Since I never deposit the 1,000, does it matter I file the amended form?
Please let me know.
Thanks again!
"it will make my future earning on the 1,000 non-taxable if I reported it"
it doesn't work that way.
$1,000 non-deducted contribution is basis and adds to any prior basis.
There is a penalty for failure to file Form 8606 when called for.
I see. Maybe I misunderstood how Roth IRA works.
If I contributed regular Roth IRA with 6,000. If I doubled it thru investment, would I get tax for the additional 6k?
And would it be any different whether it's Roth IRA or backdoor IRA?
Many thanks!
Any gains through capital gains, dividends and other distributions within the Roth IRA account are not taxed.
Qualified distributions of these gains (i.e. after age 59 1/2 and when the Roth IRA is 5 years or older) are not taxed.
The gains are taxed when distributed before age 59 1/2 (plus a 10% early distribution penalty) or when the account is less than 5 years old.