I had a rollover IRA in July 2020, I made an after tax contribution to a traditional IRA in July for 2020, I rolled over the entire rollover IRA to my current 401k in August. Can I convert the after tax contribution to a traditional IRA into a Roth? If so when? for 2020 or 2021?
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I assume yiu mean that you rolled the before -tax money in the Traditional IRA to a 401(K) leaving only the after-tax money in the IRA since after-tax money is not eligible to be rolled into a 401(K) plan. You can never convert only the after tax money to a Roth if there is any other before-tax money in that or any other Traditional, SEP or SIMPLE IRA that exists at the end of 2020. Only then, would all the after-tax money be applied to the conversion. When entering the 2020 1099-R for the conversion be sure to say yes to the after-tax (non-deductible contribution) questions and enter the year end value of the IRA's.
Be sure to enter the 2020 after-tax contribution in the IRA contributions section so that it appears on line 1 of the 2020 8606 form and will be used to offset the tax on the conversion.
I assume yiu mean that you rolled the before -tax money in the Traditional IRA to a 401(K) leaving only the after-tax money in the IRA since after-tax money is not eligible to be rolled into a 401(K) plan. You can never convert only the after tax money to a Roth if there is any other before-tax money in that or any other Traditional, SEP or SIMPLE IRA that exists at the end of 2020. Only then, would all the after-tax money be applied to the conversion. When entering the 2020 1099-R for the conversion be sure to say yes to the after-tax (non-deductible contribution) questions and enter the year end value of the IRA's.
Be sure to enter the 2020 after-tax contribution in the IRA contributions section so that it appears on line 1 of the 2020 8606 form and will be used to offset the tax on the conversion.
If I rolled over all my pre-tax ira to 401k, leaving only after tax ira in my account in August 2020. When can I convert the after tax ira? Is it on January 1, 2021? I guess my question is when does IRS take a look at your total IRA value when they decide whether to do the pro rata rule. Thank you!
You can convert it any time that you want - usually the sooner the better because any earnings are taxable before tax money. The backdoor Roth method only works if ALL the money is converted and the IRA is closed.
The IRS does not do the pro-rating - you do on a 8606 form submitted with yiur tax return. The zero value in the IRA is reported to the IRS by the financial institution on a 5498 form.
Enter a 1099-R here:
Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).
OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.
Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.
[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]
You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.
That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.
NOTE: If there is an * next to line 15 then 6-15 will be blank and the calculations will be on the "Taxable IRA Distributions worksheet instead.
Thank you, what do you mean convert it anytime? But I shouldnt convert it before I move my pre tax ira to the 401k right? Only anytime after I move it? I was under the impression by my financial advisor once I open an post tax ira this year, it gets mixed in with my pre tax and I'll have to wait until next year to convert. Very confused 😕
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