Taxed during Backdoor Roth due to $0.01 interest paid after withdrawal

user2424123 — Mon, 09 Mar 2026 09:15:44 GMT

I have done the Backdoor Roth in the past, but this year I ran into a complication due to the delay of the transaction going through on my bank, and my account contained exactly $0.01 from interest. Here is what happened:

- Made a nondeductible contribution of $6000.00 to an IRA on 12/21

- The money settles in the IRA on 12/23.

- On 12/23 immediately after settling, I initiate a withdrawal of all $6000.00 into my Roth IRA

- On 12/23 on both my IRA and Roth IRA, it shows a "Transfer / Adjustment" with -$6000 and +$6000, respectively

- On 12/27 the money is withdrawn from my account IRA and put into my Roth IRA

- On 12/28 I get exactly $0.01 in interest put into my IRA saying: "FROM 12-23 THRU 12-27"

- On 12/31, this penny is still in my IRA

Due to the events described above, in my 1099-R it says:

1. Gross distribution $6000

2a) Taxable amount $6000

2b) Taxable amount not determined

7 Distribution code(s) 2 (IRA/SEP/SIMPLE is checked)

Based on different threads like this one, it says one of the criteria for a successful Backdoor Roth is that there needs to be exactly $0 on 12/31. Due to the penny interest that was generated by the delay on the bank's actual transaction, I had $0.01 in my IRA, and therefore I am getting taxed again on my post-tax money.

Is there anything I can do to avoid paying taxes again on this $6000 conversion?
If I contacted my bank and complained about this, would it be possible to change it to be $0 in my account after-the-fact and ask them to regenerate my 1099-R with $0 in the Taxable amount? Has it been done in the past for a bank to regenerate a 1099-R after it's initial creation?

Re: Taxed during Backdoor Roth due to $0.01 interest paid after withdrawal

dmertz — Thu, 03 Mar 2022 13:13:33 GMT

The $0.01 rounds to zero. It has absolutely no effect on your tax return.

If you are seeing in incorrect taxable amount calculated on Form 8606, you've entered something incorrectly. If you had other traditional IRAs with a nonzero year-end balance (appearing on line 6 of Form 8606), your Roth conversion is partially or mostly taxable.

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Taxed during Backdoor Roth due to $0.01 interest paid after withdrawal

Re: Taxed during Backdoor Roth due to $0.01 interest paid after withdrawal