I have done the Backdoor Roth in the past, but this year I ran into a complication due to the delay of the transaction going through on my bank, and my account contained exactly $0.01 from interest. Here is what happened:
- Made a nondeductible contribution of $6000.00 to an IRA on 12/21
- The money settles in the IRA on 12/23.
- On 12/23 immediately after settling, I initiate a withdrawal of all $6000.00 into my Roth IRA
- On 12/23 on both my IRA and Roth IRA, it shows a "Transfer / Adjustment" with -$6000 and +$6000, respectively
- On 12/27 the money is withdrawn from my account IRA and put into my Roth IRA
- On 12/28 I get exactly $0.01 in interest put into my IRA saying: "FROM 12-23 THRU 12-27"
- On 12/31, this penny is still in my IRA
Due to the events described above, in my 1099-R it says:
1. Gross distribution $6000
2a) Taxable amount $6000
2b) Taxable amount not determined
7 Distribution code(s) 2 (IRA/SEP/SIMPLE is checked)
Based on different threads like this one, it says one of the criteria for a successful Backdoor Roth is that there needs to be exactly $0 on 12/31. Due to the penny interest that was generated by the delay on the bank's actual transaction, I had $0.01 in my IRA, and therefore I am getting taxed again on my post-tax money.
- Is there anything I can do to avoid paying taxes again on this $6000 conversion?
- If I contacted my bank and complained about this, would it be possible to change it to be $0 in my account after-the-fact and ask them to regenerate my 1099-R with $0 in the Taxable amount? Has it been done in the past for a bank to regenerate a 1099-R after it's initial creation?
