Backdoor Roth IRA

Forum|Forum|5 years ago
January 25, 2021
7 replies
20 views

During 2020, I contributed to my employer's Roth 401(k) and a Traditional 401(k). In late-2020, I also converted a Rollover IRA (pre-tax money from previous employers) to a Roth IRA. I'm assuming this is all taxable, but I don't understand how to answer the questions that TurboTax is asking.

So I have traditional IRA's and Roth IRA's still active without any recent contribution or withdrawal activity... How do these enter into the equation?

Do I have to worry about any 401(k) activity in my employer's account happening either this year or prior year?

Best answer by macuser_22

A rollover IRA should be a Traditional IRA. The 1099-R with the code 7 should have the IRA/SEP/SIMPLE box checked.

It will be taxable but there certainly is a way to indicate that it was converted to a Roth IRA (provided that it was converted within 60 days of the distribution).

See below for a $5,000 IRA distribution converted to a Roth.

Note: There is not difference in the tax between your method and the correct method, but only the correct method will produce the required 8606 form that reports the Roth conversion.

macuser_22

Alumni - Champ

What interview questions don't you understand?

What you described is simply a 401(k) to a Roth IRA which is taxable. Nothing that you described has anything to do with a "backdoor Roth".

What code is in box 7 on your 1099-R? If a code G then it was a direct rollover and you simply check the box that the money was moved to a Roth IRA which would be taxable.

If a code 7 or 1 then you just say that you moved the money to another retirement account and converted to a Roth IRA.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

ReformedGuyAuthor

Level 2

Thank you for the reply.

The code in box 7 is a 7, so this is a taxable distribution. While my IRA custodian knows I rolled this distribution into a Roth, there doesn't *appear to be anything on the tax return (or in TurboTax) that indicates this money went into a Roth. It's as though I cashed out a pre-tax IRA, paid the tax, and now I can do what I want with the money. It's now mine to track, and the custodian will know and specify that all future distributions are non-taxable.

Thanks for your help... let me know if I got this wrong.

-JV