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August 7, 2020
Question

backdoor Roth IRA question

  • August 7, 2020
  • 1 reply
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In 2020 I opened a Fidelity traditional IRA account and funded it with after-tax money, up to the allowed limits for both 2019 and 2020. Then I opened a Roth IRA account and transferred all the money over from the traditional IRA. I haven't got a 1099-R form for 2019 from Fidelity, and they said that since I did the conversion in 2020 I will get the form in 2021. Do I need to report the Roth conversion of my 2019 traditional IRA contribution (which I did in 2020) for the current tax year? If so, do I need to fill in a substitute 1099-R since I didn't get one from Fidelity?

    1 reply

    macuser_22
    Employee
    August 7, 2020

    You did not do any conversion in 2019 to report.    If converted after Dec 31, 2019 then it is a 2020 conversion reported on your 2020 tax return next year.

     

    HOWEVER, for the 2019 non-deductible Traditional IRA contribution to be allowed, it must be reported on a 2019 8606 form as part of your 2019 tax return.

     

    Doing a "backdoor Roth" consists of two parts 1) making an reporting a non deductible Traditional IRA contribution and 2) converting the Traditional IRA to a Roth IRA.  #1 & #2 might be reported in different tax years.

     

    The "Backdoor Roth" does not exist in tax law. It is a procedure used by some to take advantage of a quirk in tax law that allows making a non-deductible contribution to a Traditional IRA when one cannot contribute to a Roth IRA, and the immediately converting the Traditional IRA to a Roth IRA, thereby getting the money into the Roth via "backdoor".

     

    That "procedure" can only work of all these requirements are met:
    1) No Traditional IRA account whatsoever can exist (that includes any SEP or SIMPLE IRA accounts) at the start.
    2) The Tradition IRA contributions must be reported on a 8606 form as non-deductible.
    3) The conversion to a ROTH must be shortly after the contribution to avoid taxable gains.
    4) The entire Traditional IRA value must be zero that the end of the year of conversion.

    Otherwise the conversion will be partly taxable.

    **Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**