Backdoor Roth IRA conversation after December 31st

[Eva34]

I wanted to do a Backdoor Roth IRA conversion for the first time, but I did not complete it in the same year.

I had $0 in my Traditional IRA, I deposited $6000 in the traditional IRA before December 31st, 2021, but the funds became available only after December 31st, 2021. So I completed the conversation from the Traditional IRA to the Roth IRA after December 31st, 2021. 

So, I did not receive a 1099-R.

How do I fix this now without paying unnecessary taxes or penalties? Can I still execute the Backdoor Roth IRA conversion? Or can I revert everything? (I did not invest the fund )

[DanaB27 · Accepted solution]

You will only enter your contribution on your 2021 tax return. The conversion will be entered on your 2022 tax return when you get the 2022 Form 1099-R.  You will have a basis on your 2021 Form 8606 line 14 to carry forward to 2022.

To enter the nondeductible contribution to the traditional IRA on your 2021 tax return:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contributions before this tax year.
9. If you had a basis in the Traditional IRA before then enter the amount.
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible). 

To enter the 1099-R distribution/conversion on your 2022 tax return: 

1. Click on "Search" on the top right and type “1099-R”
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Your 1099-R Entries" screen click "continue"
6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[Eva34]

Ok, so it seems I am not paying any unwanted taxes.

Can I contribute another $6000 to the traditional IRA in 2022 and transfer it to the Roth IRA to execute another Backdoor Roth IRA conversion?

[DanaB27]

Yes, you can contribute another $6,000 to the traditional IRA for 2022 and transfer it to the Roth IRA. Next year on the 2022 tax return you will use the nondeductible contributions steps above to enter your 2022 contribution.

[Eva34]

Thank you, DanaB27!!

For the 2022 taxes (when I file next year), what should I put when it "Let's Find Your IRA Basis"?

What will be my total basis as December 31, 2021?

and then on the next question: Tell Us the Value of Your Traditional IRA?

- Value of Traditional IRA on December 2022: should I put $6,000?

- Outstanding Rollovers: $0 (?)
- Outstanding Recharacterization: $0 (?)

[dmertz]

Your basis from 2021 that will appear on line 2 of your 2022 Form 8606 is the $6,000 that appears on line 14 of your 2021 Form 8606.  If you transfer in your 2021 tax file to begin your 2022 tax return in 2022 TurboTax, TurboTax should already show this amount on the page that asks for your basis.

If you convert all of your traditional IRA funds to Roth in 2022, the value of your traditional IRAs on December 31, 2022 will be zero.  You won't have any outstanding rollovers or recharacterizations.

[Eva34]

ok, thank you!