topic How to report tax if I make only 1 cent contribution to Traditional IRA? in Get your taxes done using TurboTax

How to report tax if I make only 1 cent contribution to Traditional IRA?

VAer — Wed, 02 Jul 2025 00:55:48 GMT

I have IRAs with 4 brokers (4 traditional IRAs and 4 Roth IRAs), traditional IRAs are used backdoor Roth conversion.

It was not my intention to open accounts with so many brokers, sometimes I move from one broker to another, due to some reasons.

Now I am almost inactive with two of brokers, and I am thinking about contribute 1 cent to each of those two accounts, then contribute $6999.98 to remaining two traditional IRAs (for backdoor Roth conversion).

I don't want to keep traditional IRA balance as $0 for too long. I don't want brokers to close $0 traditional IRAs. Of course I can open new traditional IRAs if they close $0 balance accounts, but prefer to keep old traditional IRAs (with same account number, and setting lie account order, account nickname etc). Therefore I don't want to keep account at $0 balance.

If 1 cent traditional IRA complicates tax filing, then I will leave $0 balance traditional IRAs alone. I cannot imagine that there is 1 cent on tax form, when I enter 1 cent to tax software, it becomes 0, which may cause error.

Okay, let me summarize, if I do something as below, how will it end up for tax filing. All 4 traditional IRAs are $0 now

Broker #1: 1 cent contribution to traditional IRA, no backdoor Roth conversion.

Broker #2: 1 cent contribution to traditional IRA, no backdoor Roth conversion.

Broker #3 & #4: contribute $6999.98 to two traditional IRAs, then convert $6999.96 to Roth IRAs, and also leave 1 cent on each traditional IRA.

I feel like I should make $1 to broker #1 traditional IRA, and make $1 contribution to broker #2 traditional IRA, otherwise 1 cent is not reportable. Maybe I am wrong, we never report IRA contribution on tax return, correct? Only report backdoor roth conversion, correct? So it is fine to contribute 1 cent to traditional IRAs? Will broker generate Form 5498 for 1 cent contribution?

The reason I want to contribute 1 cent: I do backdoor roth conversion every year, and I want to keep previous year's traditional IRA basis as low as possible, a few cents (total 4 cents for 4 accounts) will be rounded down to $0. Keep future tax return numbers for backdoor roth conversion clean and neat.

Re: How to report tax if I make only 1 cent contribution to Traditional IRA?

Opus 17 — Wed, 02 Jul 2025 01:06:46 GMT

TurboTax will round it down to $0.00 (the IRS encourages rounding to nearest whole dollar so TurboTax does that). I have no idea what that would do when it comes to a conversion. It would work on the tax form due to rounding, but I don’t know what would happen when the IRS tries to reconcile the form 5498s.

The whole scheme seems needlessly complicated. If you don’t need 4 IRA accounts, close two, or do 4 back door IRAs at $1750 each.

Re: How to report tax if I make only 1 cent contribution to Traditional IRA?

VAer — Wed, 02 Jul 2025 01:17:15 GMT

@Opus 17

No, I don't want to close them. I am inactive with two brokers now, but I have some money on their Roth IRAs.

If I want to contribute money to those two Roth IRA in the future, I will do backdoor Roth conversion again, at that time, I will need traditional IRA again. Whatever amount of money had put in there before, stay there.

I only want to do backdoor Roth IRA with two active brokers for now. Don't want add any more money to inactive accounts.

Re: How to report tax if I make only 1 cent contribution to Traditional IRA?

VolvoGirl — Wed, 02 Jul 2025 01:27:29 GMT

I wouldn’t contribute 1 cents. I would go over $1, like do $10. @dmertz any thoughts?

Re: How to report tax if I make only 1 cent contribution to Traditional IRA?

VAer — Wed, 02 Jul 2025 01:34:02 GMT

I don't want money left on traditional IRAs on December 31 of each year.

My ideal goal is to convert all the money to Roth IRA, and keep $0 on each traditional IRA. But some brokers may close $0 balance account. Therefore, I want to keep 1 cent on each traditional IRA on December 31 of each year, total 4 cents (for 4 accounts) will be rounded down to $0 as basis value from year year.

@VolvoGirl

Re: How to report tax if I make only 1 cent contribution to Traditional IRA?

baldietax — Wed, 02 Jul 2025 01:35:07 GMT

have you asked the brokers to just keep the accounts open?

Re: How to report tax if I make only 1 cent contribution to Traditional IRA?

VAer — Wed, 02 Jul 2025 01:38:07 GMT

@baldietax

Below response is from one broker. The system could close $0 balance, I would just want to keep 1 cent on the account to avoid being closed.

Inactive $0 balance accounts are reviewed throughout the year and, in turn, may be closed. Inactive and closed retail accounts are annually purged from the system in May after having a $0 balance for the current and prior year-to-date files. Per industry regulations, we're required to maintain this information for a certain period of time. It's important to note that once an account has been purged, it can no longer be viewed on our website.

Re: How to report tax if I make only 1 cent contribution to Traditional IRA?

VAer — Wed, 02 Jul 2025 01:49:33 GMT

@VolvoGirl

@Opus 17

@baldietax

Anyway, I don't want to make situation complicated, I just make $100.01 contribution to each of two inactive account, then make $100 backdoor Roth conversion, and keep 1 cent on traditional IRA. One time only.

The issue is backdoor roth conversion cannot be done online with Webull, need to submit signed paper form and staff processes manually, people may think I am crazy to do only $100 backdoor conversion and leave 1 cent on traditional IRA.

Re: How to report tax if I make only 1 cent contribution to Traditional IRA?

Opus 17 — Wed, 02 Jul 2025 21:35:17 GMT

Maybe you have the wrong brokers.

It so happens I do everything through TIAA, because I have employment at an educational institution. This year, I had do to a rollover from my 403b account to a private IRA, and then rollover from the IRA to an HSA (qualified HSA funding distribution). I opened the IRA, did the first rollover, waited for it to settle, then did the QHSAFD. I selected a 100% distribution, so my IRA which started out $5000, actually rolled over $5002. and some cents. The IRA still exists but has zero balance. I don't care if they close it or not, because it was free to open, and if I need it I can just open a new account.

Maybe your bank charges you to open and close IRAs? You may need to find a new bank.

Or, you don't need for the IRA and Roth IRA to be at the same broker to do a backdoor Roth. You can have one IRA open at bank A, and do direct conversions to bank A, B, C or D. You don't need separate IRAs open at bank B, C and D. Even if you want to spread out your Roth money to different brokers, you only need one traditional IRA.

Bottom line is, we don't know exactly what would happen with a one cent balance, but we don't recommend it. Good luck.