Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 1
posted Nov 14, 2023 7:12:12 PM

Pro rata rule for Roth IRA conversion, please help, Thanks!

I made an After Tax Traditional IRA contribution of $6500 for 2023 and invested it. However, I gained interest, so the Traditional IRA totaled to $6501 before I was able to convert $6500 to Roth IRA. Now I have $1 left in my After Tax Traditional IRA. Does the Pro rata rule for for Roth conversion rule now apply? How do I deal with the $1 left in my Traditional IRA on the Form 8606 for Tax Year 2023? Can I still roll the $1 to my Roth to bypass the Pro rata rule? But it’ll be over $6500 for Roth IRA conversion. What should I do? Thanks!

0 3 1032
1 Best answer
Level 15
Nov 15, 2023 12:53:48 PM

Presumably you have no other funds in traditional IRAs since the pro rata rule treats all of your traditional IRAs in aggregate as if they are a single large traditional IRA.  Because of this there is really no such thing as an "after-tax traditional IRA," only after-tax, nondeductible contributions to your traditional IRAs.

 

No matter what you do, Form 8606 Parts I and II are required to be included with your 2023 tax return.  If you have $1 left in traditional IRAs at the end of 2023, $6,499 of your $6,500 Roth conversion will be nontaxable and $1 will be taxable.  If you do noting more, $1 of basis will remain in your traditional IRA.

 

Opus 17 is correct.  Since you presently have $1 in traditional IRAs and $1 in basis, the simplest thing to do would be to convert this remaining $1 before the end of 2023.  Doing so won't change your taxable income.  You would still receive a single Form 1099-R and it would report the total of $6,501 converted.

3 Replies
Level 15
Nov 15, 2023 6:48:54 AM

Level 15
Nov 15, 2023 7:03:06 AM

This all happened in 2023, correct?  I believe that if you convert the remaining $1 now, that will take care of it, since it all gets reported together on your 2023 tax return.  (This also assumes that the $6501 was your only funds in any traditional pre-tax IRA.  If you have other traditional IRA funds, even with a different broker, we need more details.)  And in the future, try specifying that you want to convert "100%" rather than a specific dollar amount.  

Level 15
Nov 15, 2023 12:53:48 PM

Presumably you have no other funds in traditional IRAs since the pro rata rule treats all of your traditional IRAs in aggregate as if they are a single large traditional IRA.  Because of this there is really no such thing as an "after-tax traditional IRA," only after-tax, nondeductible contributions to your traditional IRAs.

 

No matter what you do, Form 8606 Parts I and II are required to be included with your 2023 tax return.  If you have $1 left in traditional IRAs at the end of 2023, $6,499 of your $6,500 Roth conversion will be nontaxable and $1 will be taxable.  If you do noting more, $1 of basis will remain in your traditional IRA.

 

Opus 17 is correct.  Since you presently have $1 in traditional IRAs and $1 in basis, the simplest thing to do would be to convert this remaining $1 before the end of 2023.  Doing so won't change your taxable income.  You would still receive a single Form 1099-R and it would report the total of $6,501 converted.