Backdoor IRA after January

[cailucun]

I contributed $6000 to traditional IRA in 2020, which now grow to about $7000.

I am wondering if it is too late to convert it to Roth IRA now (1/1/2021 to 4/15/2021), and do another $6000 backdoor IRA in 2021 (after 4/15/2021).

[DanaB27 · Accepted solution]

Yes, you can make the two conversions but both of them will count for 2021. You will get the 1099-Rsfor these conversions in 2022 and enter them on your 2021 tax return.

Please use the following instructions to enter a "Backdoor IRA" to ensure it is calculated correctly in TurboTax:

To enter the nondeductible contribution $6,000 from 2020 to the traditional IRA (repeat in 2021):

1. Login to your TurboTax Account 
2. Click on the Search box on the top 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 nondeductible contributions in prior years (before 2020).
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.

To enter the 1099-R distribution/conversion on your 2021 tax return: 

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Click "Continue" and enter the information from your 1099-R
5. 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”
6. On the "Your 1099-R Entries" screen click "continue"
7. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
8. Answer the questions about the basis

[cailucun]

Thanks for your response.

When preparing my 2020 Tax, I was prompted the following question when entering my traditional IRA contribution made in 2020.

Any Nondeductible Contributions to Your IRA?
Let us know if you made and kept track of any nondeductible contributions  to your traditional IRA from 2019 or prior years.

Is 2019 a typo? Shouldn't it be 2020?

[fanfare]

you don't have to wait till after 4/15.

Just make sure the custodian knows your $6,000 is for year 2021 and you can convert it to Roth immediately.

[DanaB27]

No, 2019 and prior is correct for this question. TurboTax is asking about the nondeductible contributions that you tracked in prior years (before 2020). You will enter the basis from the contributions from 2019 and prior years (see steps 8and 9 of nondeductible contribution). If you don't have any then you say no. 

After this you will get to the "Choose Not to Deduct IRA Contributions” screen to make this years contribution nondeductible.

@cailucun

[Buford1720]

I completed the first part of the backdoor contribution in TurboTax recording the nondeductible IRA contribution. I was told that the second part, converting to the Roth would be done with my 2021 return after I receive a 1099-R. The actual contribution and immediate conversion to the Roth occurred early April 2021 for 2020. I just wanted some assurance this is the correct procedure. I'm not sure how the Roth reported for 2021 would be counted as a 2020 contribution.

[Cynthiad66]

A backdoor Roth IRA allows you to get around income limits by converting a Traditional IRA into a Roth IRA. Contributing directly to a Roth IRA is restricted if your income is beyond certain limits, but there are no income limits for conversions.

Doing a backdoor Roth conversion is a two step process.

TurboTax Online

TurboTax CD/Download

[Buford1720]

For tax purposes, the second part - converting to a Roth - occurs on the 2021 tax return? 

[Cynthiad66]

Yes.  You will be issued a Form 1099R for reporting the Roth conversion.