@Tiborone wrote:
Sounds good. So the steps if I understand well will be:
- add another 6,5k nondeductible contribution per person today (increased amount for 2023. It is an optional step now, but I would elect to do this)
- convert 12,5k to Roth as soon as possible, when the additional 6.5k settles in the Fidelity account
- report 6k non-deductible traditional IRA contribution for 2022 through 8606 (the amount I did on April 17)
- report the additional 6,5k non-deductible contribution I make today on 2023 return through 8606
- report the 12,5k Roth conversion on the 2023 tax return.
How do I pay taxes on the remaining 109$? And after indicating it as taxable, can I convert that to Roth as well? Thanks again.
Just for my sake, I'm going to repeat this in chronological order.
1. File your 2022 return reporting the non-deductible contributions to traditional IRAs (you and your spouse, I think.)
2. Make a non-deductible 2023 contribution. Wait for it to settle.
3. Rollover/convert the entire balance of the traditional IRA to a Roth IRA.
4. In January 2024, the plan trustee will send a 1099-R reporting the conversion. It should have the entire amount converted listed in box 1 (gross distribution) and in box 2a (taxable amount) with box 2b checked ("taxable amount not determined"). There should be a code 2 in box 12.
5. Prepare your 2023 tax return. You will list the non-deductible contribution and the 1099-R for the conversion. Turbotax will prepare a form 8606 which will calculate that only $109 of the conversion is taxable.
