Back Door Roth IRA
A client of mine has missed the conversion of his 2017 back door Roth (traditional IRA for 2017 contributed during tax filing season of 2018 and no deduction for taxes, thus it is taxed and able to be converted into Roth with no tax withholding). To do this conversion now, what do we (he and I) need to do for the IRS?
Permalink Submitted by Alan - IRA critic on Thu, 2019-02-14 23:15
Form 8606 for 2017 should have been filed with 2017 taxes reporting a non deductible contribution. A conversion of his TIRA account now will be reported on client’s 2019 tax return on Form 8606. If his TIRA holds other funds beside the 2017 contribution, the conversion will be taxed according to the pro rate rules of Form 8606. If the TIRA holds just this one contribution, the entire balance will be converted and taxes due on any amount in excess of the non deductible contribution. All this is calculated on Form 8606. Client may also want to add a 2018 non deductible contribution before the conversion and just do a single conversion of the total.
Permalink Submitted by Karin Rettger on Tue, 2019-02-19 16:55
Is there a time limit on conversion of an after tax IRA contribution to a Roth. A client of mine was looking to make a 2018 after tax IRA contribution and then convert it. Fidelity told her that she missed the deadline to do a conversion. I read the Definitive Guide to Back Door Roth and from that did not see a deadline. Can you shed some clarification on this for me? Thank you.
Permalink Submitted by David Mertz on Tue, 2019-02-19 18:59
What Fidelity was trying to tell her is that a Roth conversion done in 2019 is reportable on her 2019 tax return, not on her 2018 tax return. For the Roth conversion to have been reportable on her 2018 tax return the distribution from the traditional IRA would have to have been received by December 31, 2018 and reported on a 2018 Form 1099-R.