Back door IRA Basis

[wendy3152020]

I did an IRA backdoor contribution 6K in 2023 for 2022 and the Money was paid between 1/1/23-4/14/23 for 2022. When I rolled over the money from the Traditional IRA to the Roth IRA, it was less than $6k, then the basis on my 8606 is bigger than 6K, and it was more than 2023 1099R taxable, $6030, does it mean I don't need to pay income tax on the gain since the basis is bigger than the distribution, the gain was smaller than the loss in 2023 when I rolled over from traditional to Roth IRA? Thank you.

Form 8606 is as follows:

1)6000

2) 6000

3) 12000

4)

5) 12000

6) 0

7) 

8 )

9) 

10) 

11)

12) 

13) 5930

14) 6070

16)5930

17) 5930

 18) 0

All the rest is 0 or blank.

[DanaB27]

To confirm, you converted the contribution for 2022 in 2023 and you made in 2023 a contribution for 2022 of $6,000 (reported on your 2022 return) and for 2023 of $6,000? When did you convert the contribution for 2023?

Yes, if you converted less in 2023 because of a loss then the rest of your basis will be carried forward and can be used for future gains. If you convert the 2023 contribution in 2024 at $6,030 and you have the basis of $6,070 from 2023 then you won't have any taxable income (assuming you don't have any pre-tax funds in your traditional/SEP/SIMPLE IRAs).

[wendy3152020]

Thank you. The 2023 contribution will be made in 2024 between 01/01-04/15/24, and the 2023 contribution will be $6500 ( I believe the limit is $6500 for 2023). The conversation will be made soon after the contribution. 

Can you please explain "If you convert the 2023 contribution in 2024 at $6,030 and you have the basis of $6,070 from 2023 then you won't have any taxable income (assuming you don't have any pre-tax funds in your traditional/SEP/SIMPLE IRAs)."? wasn't the $6070 basis was for the 2020 contribution? also, the 2023 contribution will be $6,500. 

Thank you very much.

[DanaB27]

Yes, the limit is $6,500 for 2023, if you are under 50. Please see IRA contribution limits for details.

Your 2023 Form 8606 above shows that you made a $6,000 nondeductible traditional IRA contribution for 2023 (line 1). If you made a $6,500 contribution for 2023 in 2024 then line 1 and 4  needs to be $6,500. Line 5 will be $6,000. Your basis on line 14 should be $6,570 and will be carried over to 2024 to be used when you convert the contribution for 2023 in 2024.

Your 2023 Form 1099-R for the conversion of the contribution for 2022 shows $5,930 and therefore part of the unused basis will be carried forward to 2024 (included in the amount shown on line 14 on Form 8606).