Question
Backdoor Roth/Tax Question
In March 2016, I opened a Roth IRA account with $5500 post-tax dollars. In January 2018, I contributed $11,000 post-tax dollars to a traditional IRA account (since I no longer qualified to contribute to a Roth IRA). Half of this contribution was for the year 2017 (for which Form 8606 was filed last year); the other was for 2018. Also in January 2018, Fidelity converted this $11,000 Traditional IRA contribution to Roth (backdoor). The new balance of the Roth account is now about $18k (initial $5500 + interest on that investment + $11k conversion).
I am now trying to confirm how these transactions will be taxed. Fidelity has issued the following forms:
- 2017
- Form 5498-1: $5,500 IRA contribution, $0 Fair Market Value
- 2018
- Form 5498-2: $5,500 IRA contribution, $0 Fair Market Value
- Form 5498-3: $11,000 Roth IRA conversion, $18k Fair Market Value
- Form 1099-R: $11,000 gross distribution / taxable amount, everything else blank except "2" for distribution code (box 7) and "X" for IRA/SEP/SIMPLE.
My understanding is that half of the $11k was reported last year when it was contributed to the Traditional IRA account. The other half will be reported this year. The part I'm hung up on, though, is whether the $11k conversion will/should be taxed in addition. My hunch is "no" since the $11k contributions to the Traditional IRA were made with post-tax money, and they were separately taxed as contributions.
I am, however, confused by the following:
- Does the $11k notated in the 1099-R mean I will be taxed on it?
- Does the $11k conversion referred to in Form 5498-3 trigger taxation?
- Is the $18k FMV in Form 5498-3 taxed? The $7k or so is broken into the 2016 Roth contribution ($5500), which was made with post-tax dollars, and any interest earned ($1500).
Greatly appreciate any guidance on how to properly navigate the tax requirements.
