gibbsds
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- Posted I have it straight now. Thanks so much for your help! on Retirement tax questions. June 6, 2019 2:52 AM
- Posted One last post for me dmertz (I hope). If I choose to mak... on Retirement tax questions. June 6, 2019 2:52 AM
- Posted I will do that, thanks. As an aside do you log this defe... on Retirement tax questions. June 6, 2019 2:52 AM
- Posted dmertz, I believe I had already done what you suggested a... on Retirement tax questions. June 6, 2019 2:52 AM
- Posted Thanks for all the help. We are now running an alternate... on Retirement tax questions. June 6, 2019 2:52 AM
- Posted Thanks Hal_Al. It doesn't seem consistent that 2016 IRA c... on Retirement tax questions. June 6, 2019 2:52 AM
- Posted Why are parts of our Roth IRA conversions showing taxable? on Retirement tax questions. June 6, 2019 2:52 AM
June 6, 2019
2:52 AM
I have it straight now. Thanks so much for your help!
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June 6, 2019
2:52 AM
One last post for me dmertz (I hope). If I choose to make all $6,500 non deductible and answer the interview to indicate that $4,500 was contributed between January 1, 2017 and April 18, 2017 form 8606 populates line 4 with the $4,500 amount. However, regardless of whether I put zero or $4,500 on line 4 the result on line 14 (your total basis in traditional IRAs for 2016 and earlier yeas) shows $4,500. The IRA Information Worksheet gets its line 3 from line 14 of form 8606 and of course it shows $4,500, but the line is labeled "basis carryover as of 12/31/2016". But I had no balance in my traditional IRA on December 31st having converted the $2,000 to a Roth earlier in the year. So here are my question(s): 1) how can I have a 12/31/16 basis under this scenario? 2) How will this supposed basis affect my 2017 taxes, if at all? I know the contribution year is extended to the filing deadline while conversions are in what ever calendar year they're executed in, but what about basis in this case? And finally, if I contribute the remaining $4,500 to a non deductible IRA before the filing deadline can I immediately do a Roth conversion without it being taxable in 2017? I ask this given a potential basis entering tax year 2017.
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June 6, 2019
2:52 AM
I will do that, thanks. As an aside do you log this defect with TurboTax so they can fix the programming to allow for the flexibility the instructions for line 4, form 8606 allow?
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June 6, 2019
2:52 AM
dmertz, I believe I had already done what you suggested and I still have the issue. The IRA Information Worksheet shows $2,000 on line 3 but this should be zero as I converted this money to a Roth in calendar year 2016, right? The source of line 3 says it's Form 8606 line 14. which indicates a basis of $2,000 in traditional IRAs for 2016 and earlier years. However. that calculation relies on line 4 being correct and it shows $2,000 having been contributed between January 1, 2017 and April 18, 2017. This is not correct and if I try and override this value to zero then TurboTax gets all hot and bothered indicating an error in the final review. Something about not being able to override that line as it's used for an internal check for electronic filing. Going back to fix it in the interview is problematic as it feels like not all interview questions are re-raised if I choose to revisit the topic, but the points you raised I believe are entered correctly. Given my situation, can you tell me what each line should show on the relevant worksheets & forms?
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June 6, 2019
2:52 AM
Thanks for all the help. We are now running an alternate scenario where we make only the original $2,000 / each traditional IRA contribution that we declared non deductible and back door converted to Roths in calendar year 2016 the only non deductible contribution for 2016. The remaining $4,500 / each that we will contribute before the April 18, 2017 deadline for 2016 we will elect as deductible for a total of $9,000 in deductible IRA contributions for 2016. I may be thick, but why does this result in the original $2,000 / each being TAXABLE Roth conversions? We each declared the $2,000 non deductible and had no other IRA assets when we converted them to Roths in calendar year 2016.
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June 6, 2019
2:52 AM
Thanks Hal_Al. It doesn't seem consistent that 2016 IRA contributions can be made until April 18, 2017 but conversions made after December 31st but before April 18th are not 2016 conversions. Shouldn't they go hand in hand?
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June 6, 2019
2:52 AM
Calendar year 2016 was the first year that I was not covered
by a retirement plan at work since I retired in 2015. In calendar year 2016 my wife and I initially
contributed $2,000 each to traditional IRAs and then almost immediately converted
the funds to Roth IRAs as we weren’t sure at the time that we would have enough
earned income for us both to make the full contributions and conversions. Now in early 2017, as we are preparing our
taxes, we realize that we can contribute the full amount. We do not want to make the contributions
deductible for a number of reasons including wanting to convert the remaining $4,500
funds to Roths, so when Turbotax asked what portion we wanted non deductible we
each selected $6,500. As an aside we have
no other traditional IRA assets either deductible or non deductible. The non deductibles were converted to Roth IRAs in the years we made the non deductible contributions.
So here’s the issue, when we indicated in the Turbotax interview
that the remaining $4,500/person is to be contributed between January 1, 2017
and April 18, 2017, line 4, of form 8606 shows $4,500 which makes sense. However, for line 5 (subtraction of line 4
from 3) shows $2,000. When you work your
way through the form the $2,000 ends up being non taxable and the $4,500 taxable. Why isn’t all $6,500 non taxable if we each intend
to convert the non deductible (self selected) $4,500/each to Roth IRAs by April
18th? Why do we end up with a
$4,500 basis on funds that are non deductible and converted to Roths? In
previous years when we did backdoor Roth conversions nothing was taxable and no
bases were created. Finally, we modified
the existing 1099-Rs to show $6,500 in boxes 1 & 2A of our 1099-Rs. When we eventually add the new 1099-R’s
showing $4,500 each we back down the originals to $2,000.
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