26 June 2022 9:38

Need help with completing a backdoor Roth IRA conversion

A backdoor Roth can be created by first contributing to a traditional IRA and then immediately converting it to a Roth IRA (to avoid paying taxes on any earnings or having earnings that put you over the contribution limit).

How do you complete a backdoor Roth?

How to Perform and Report on Paper the Backdoor Roth IRA Process

  1. Step 1 – Contribute to a Traditional IRA. …
  2. Step 2 – Leave the Money in Cash. …
  3. Step 3 – Convert the Traditional IRA to a Roth IRA. …
  4. Step 4 – Invest the Money. …
  5. Step 5 – Beware of the Pro-Rata Rule. …
  6. Step 6 – Fill Out IRS Form 8606 Correctly.


How do I fill out a backdoor Roth Form 8606?

Part I of form 8606

  1. Line 1: Enter the nondeductible contribution you made to a traditional IRA in 2020. …
  2. Line 2: Enter your total basis in Traditional IRAs. …
  3. Line 3: Add lines 1 & 2 so you would enter $6,000 (or whatever amount you used for your nondeductible contribution).

What is the deadline for backdoor Roth conversion?

You have until April 18th, 2022 to make contributions for 2021. You have to recharacterize a 2021 contribution by the due date for filing your 2021 tax return (including extensions).

Can you still do a backdoor Roth IRA in 2020?

If you haven’t filed your taxes for 2019 yet, you have until April 15, 2020, to complete a backdoor Roth IRA conversion. You can start making contributions for each new tax year beginning on January 1.

How do I file backdoor Roth in TurboTax?

How do I enter a backdoor Roth IRA conversion?

  1. Open your return if it’s not already open.
  2. Inside TurboTax, search for ira contributions and select the Jump to link in the search results.
  3. Select Traditional IRA on the Traditional IRA and Roth IRA screen and Continue.

Can I still do a backdoor Roth in 2021?

Starting in 2021, the Backdoor Roth IRA has allowed all income earners the ability to make a Roth IRA contribution. Prior to 2010, any taxpayer that had income above $100,000 was not allowed to do a Roth IRA conversion which prevented one from making an after-tax IRA contribution and converting to a Roth.

Do I need to file 8606 for Roth conversion?

Do I Need to Fill Out Form 8606? Form 8606 must be filed with your Form 1040 federal income tax return if you (a) make nondeductible contributions to a traditional IRA, including repayment of a qualified disaster distribution, or (b) converted assets (pre-tax or nondeductible) from an IRA to a Roth IRA.

What happens if I dont file form 8606?

Failure to file Form 8606 for a distribution could result in the IRA owner (or beneficiary) paying income tax and the additional 10 percent early distribution penalty tax on amounts that should be tax-free. Example: Katlyn made a nondeductible contribution to her traditional IRA for tax year 2017.

Do you need 1099-R for backdoor Roth?

If you’re married and both of you did a Backdoor Roth, enter the 1099-R for both of you, but pay attention to select whose 1099-R it is. Don’t accidentally assign two 1099-R’s to the same person.

Will backdoor Roth be allowed in 2022?

The backdoor Roth IRA strategy is still currently viable, but that may change at any time in 2022. Under the provisions of the Build Back Better bill, which passed the House of Representatives in 2021, high-income taxpayers would be prevented from making Roth conversions.

Is the Mega Backdoor Roth going away?

Like the Backdoor Roth IRA, the “Mega” Backdoor Roth also got a reprieve in 2021, but its future is uncertain. The Mega Backdoor Roth is a 401(k) plan version of the Backdoor Roth IRA. It only works if your 401(k) plan allows for after-tax contributions and in-service distributions of after-tax funds.

Can I do a Roth conversion in 2022 for 2021?

On April 5, you could convert your traditional IRA to a Roth IRA. However, the conversion can’t be reported on your 2021 taxes. Because IRA conversions are only reported during the calendar year, you should report it in 2022.

How do I report a Roth conversion?

Use Form 8606 to report:

  1. Nondeductible contributions you made to traditional IRAs;
  2. Distributions from traditional, SEP, or SIMPLE IRAs, if you have a basis in these IRAs;
  3. Conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs; and.
  4. Distributions from Roth IRAs.


Can TurboTax handle Roth conversions?

If you only converted some of the distribution to a Roth IRA, choose, “I did a combination of rolling over, converting, and cashing out the money.” If you choose this option, Turbo Tax will ask you to identify how much of the distribution was converted to a Roth IRA, and how much of the distribution was rolled over

What is the deadline for a Roth conversion for 2021?

December 31

Is there a deadline to convert? Yes, the deadline is December 31 of the current year. A conversion of after-tax amounts is not included in gross income. Any before-tax portion converted will be included in your gross income for the conversion tax year.

What does a 1099-R look like for a Roth conversion?

For a Roth conversion, the 1099-R usually has a Distribution Code 2 in Box 7. That means it is an early distribution but an exception applies so there is no penalty. To check that the right results show, look at your 1040 form. There should be no entry on Line 32 for IRA deduction.

Does a Roth conversion have to be done by year end?

Roth IRA – Conversion From an IRA Distribution Must be by End of Tax Year. The original conversion from a Traditional IRA to a Roth IRA must be completed within 60 days after the end of the tax year.

Can I do a Roth conversion after December 31?

Alas, the year you move the funds from traditional IRA to Roth IRA is the year that those assets are taxed. Any conversion between January 1st and December 31st is taxable in that year. There is no prior-year provision. You can not convert now but count it as last year.

Can I convert my 2021 RMD to a Roth IRA?

Additionally, you cannot convert required minimum distributions (RMDs) to a Roth IRA. As such, if you want to do a Roth conversion after age 72, make sure you take out all your RMDs from that IRA before you do a conversion.

Do I have to pay estimated taxes on Roth conversion?

Paying Your Taxes on a Roth Conversion



You may have to pay taxes on the conversion either at the time of conversion or as estimated tax payments during the tax year of the conversion. It is not wise to wait until the tax deadline for the year to pay the taxes because you may incur penalties.

Do you pay taxes twice on backdoor Roth IRA?

A backdoor Roth makes that IRA withdrawal shortly after the contribution, so you barely pay any taxes at all on the conversion to a Roth account. That net effect is very similar to a direct contribution to a Roth IRA.

How do I avoid underpayment penalty on Roth conversion?

Quote:
Quote: If they paid at least 90 percent of the tax for the current. Year. Or they paid at least 100 of the tax shown on their return for the prior.