1099-R - Taxed on backdoor Roth IRA conversion even though the money was already taxed?

Forum|Forum|2 years ago
March 14, 2024
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Last year I did a Traditional IRA contribution with after tax money and converted it to my Roth IRA. I did this using the backdoor Roth IRA conversion. I have a 1099-R and the amount in box 2a is $6,002.54. I know the $2.54 is over the limit and I'm not sure how I got the gains but I converted it as soon as I could after making the contribution to the Roth IRA. Box 7 is a 2 value (early distribution (except Roth IRA). So I have two questions here

1. When I enter in box 2a with 6,002.54 my tax bill increases, but I'm wondering why box 2a isn't 0 since I have already been taxed on that money. I'm getting double taxed on the money with box 2a having a value. Is this normal?

2. Since I gained $2.54 cents before the total conversion of my Traditional IRA account to my Roth IRA, what do I do about that?

Thank you very much for your help

Critter-3

1 ... you need to have the prior year non deductible contribution on the form 8606 ... did you miss that step last year? Did the 8606 info not transfer ?

https://ttlc.intuit.com/questions/1899503-what-is-form-8606-nondeductible-iras-used-for

2... the $3 is a taxable conversion. FYI ... it you do this again in the future leave the contribution in something that doesn't pay any interest.

haryyAuthor

Thank you for the response @Critter-3,

For the first time in ~15 years I paid a tax company to do them for me. I probably should have done it myself but time and I'm not a pro 🙂

A little history on my Backdoor Roth contributions and when they were converted

Date	Amount	Date of conversion to Roth IRA
07/08/2020	$6,000.00	07/10/2020
05/17/2021	$6,000.00	06/23/2021
12/20/2021	$6,000.00	12/22/2021
12/27/2022	$6,500.00	01/06/2023
03/01/2024	$6,500.00	04/05/2024
03/01/2024	$7,000.00	04/05/2024

If I look at my taxes from last year (2022) and I look at form 8606 here are the values for what I see in there

Box	Value	Description
01	6,000	Enter your nondeductible contributions to traditional IRAs for 2022, including those made for 2022 from January 1, 2023, through April 18, 2023. See instructions
02	0	Enter your total basis in traditional IRAs. See instructions
03	6,000	Add lines 1 and 2
10	X	Divide line 5 by line 9. Enter the result as a decimal rounded to at least 3 places. If the result is 1.000 or more, enter "1.000"
14	6,000	Subtract line 13 from line 3. This is your total basis in traditional IRAs for 2022 and earlier years

Does this seem like its fill out correct for last year or should I see a total of $18,000 somewhere, which would be the total cost basis for the Backdoor conversions. One of the parts that confuses me is 8606-Box 2, since my traditional IRA account is 0 after a conversion would this value increment each year if I keep contributing?

I think one of the pieces I was missing for this year is that I didn't put $6,500 into the "Let's Find Your IRA Basis" page. This says "Total Basis as of December 31, 2022", I had $6,500 in there on 12/27/2022 which was converted on 01/06/2023. After adding this in there it brought my tax bill back down so I was being double taxed on those funds.

To respond to your answer for 2, that makes sense on getting taxed for the $3 and it looks like that's what TurboTax auto entered for my 2023 taxes. The odd thing is that when I put the funds in there it was in the money market so I didnt think it would fluctuate at all but it gained $2.54 for some odd reason. I intend to keep doing this for as long as its allowed so hopefully that wont happen to me again.

I think I have two questions coming out of this

1. What do you think about what I mentioned above and what was filled last year. Is this correct? If not do I need to get a hold of the people I had do my taxes last year?

2. Should I be seeing a cumulative total basis for these backdoor Roth conversions every year on my taxes? Meaning this year I should see the number $24,500 ($6,000 + $6,000 + $6,000 + $6,500) somewhere for my total backdoor Roth conversions over the years and next year I would see the total of $38,000?

Thank you very much for the help!

-haryy