Roth Conversions & IRS Form 8606 | Ed Slott and Company, LLC

Roth Conversions & IRS Form 8606

I have questions about the completion of Form 8606 relating to a Roth conversion from a traditional IRA. All my traditional IRAs are tax deferred meaning, to me, that I pay tax whenever I take money out for my RMD or when I do a Roth conversion. This is because I did not pay tax on the money originally contributed.

If I do a $30K Roth conversion in tax year 2019 what Parts and line numbers are filled out on Form 8606? I believe the correct answers are $30K on line 8 of Part I (as the amount converted in 2019) and $37K on line 9 as the total of lines 6, 7, and 8. I also believe Part II is completed with the $30K on lines 16 and 18 as the taxable amount.

How often is Form 8606 submitted and under what other related circumstances

My other question is about basis. What is basis, if any, is there in this situation? I don't think I have any basis in the situation cited.

With no basis in nondeductible traditional IRA contributions, only Part II of Form 8606 needs to be completed to report the Roth conversion.  Lines 16 and 18 will show the amount converted and line 17 will be zero.  Part I should remain blank.  Part III is only to be completed if you receive a nonqualified distribution from your Roth IRAs.

Hi Tom.  Since your TIRA has no basis because you never made a non deductible contribution, for a conversion all you need to complete is Part II, which is only 3 lines but line 17 will be blank. You can ignore Part I entirely. Unless you make a non deductible contribution at some point you will never complete Part I, but you will need Part II for any year in which you convert. And even though you have a Roth IRA, as long as your first Roth contribution was prior to 2016 you will not need Part III even when you take a Roth distribution.

Thanks to both of you for your prompt reply.  I did not expect anything to appear in Part I, but for some reason the TaxSlayer software program did enter the Roth conversion amount on line 8 as well as lines 16 and 18.  I am considering another Roth conversion in 2020 tax year since the RMD requirement does not exist.  Based on charity needs due to the pandemic I did a QCD earlier this year but that of course is not taxable.  Could have waited and doubled up QCDs in 2021 with a definite tax advantage, but their needs prevailed and I feel good about that!  I appreciate what you both do in contributing to this and other forums.

Don't worry about the converted amount showing on line 8. It should not be there, but will not do any harm.

 

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