Question

Backdoor Roth IRA conversion of 3 years non-deductible traditional IRA contributions

Forum|Forum|6 years ago
September 9, 2019
2 replies
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I contribute the maximum to my traditional IRA each year with non-deductible income.

2017 = $5500

2018 = $5500

2019 = $6000

Total now = $17,897.40 of non-deducted income in my traditional IRA.

I usually convert the traditional IRA amount every year using a backdoor Roth IRA conversion, but not for the last 3 years. I now want to convert the 3 years of contributions in my traditional IRA to the Roth IRA this year, and want to determine how much tax (if any) I will owe.

1) How do I determine my basis in traditional IRAs (Line 2 of 8606)? The tax basis chart says it would be $5500 (Line 14 from my previous year 8606) - is that correct, or should it include the full $17,897? Does the basis accumulate?

2) Do I need to report any gains on the traditional IRA over the last 3 years? How and where do I do this?

Thanks in advance.

Critter

Employee

If you will convert it all in 2019 then all the contributions will be taken into consideration on the 2019 return ... if so only the earnings portion will be taxable if you choose to convert the entire balance of the IRA at once.

D

dmertz

Employee

Presumably the 2019 Form 8606 will have line numbering the same as the 2018 Form 8606. Your 2019 Form 8606 will have:

Line 1 = $6,000 (your contribution for 2019)

Line 2 = line 14 of your 2018 Form 8606, presumably $11,000.

If your the total value of your IRA account(s) is $17,897.40 on the day that you convert the entire amount, the taxable amount will be $17,897.40 - $17,000 = $897.40.

V

vstrongeAuthor

Line 14 of my 2018 8606 was $5,500. So the taxable amounts work out to $17,897.40 - $11,500 = $6,397.40.

But it doesn't make sense to me why I would need to pay tax on the additional $5500. I think the basis I enter in Line 2 is not correct, but that's the Line 14 of my 2018.

Instructions say to use the Total Basis Chart:

IF the last Form 8606 you filed was for a year after 2000 and before 2019,
THEN enter on line 2 the amount from line 14 of that Form 8606

Thanks in advance

D

dmertz

Employee

If you properly prepared your 2017 Form 8606, line 14 of the 2017 Form 8606 would have $5,500 that would transfer to line 2 of your 2018 Form 8606. The separate $5,500 on line 1 of your 2018 Form 8606 would be added to that, resulting in line 14 of your 2018 Form 8606 having $11,000. The $11,000 from line 14 of your 2018 Form 8606 will transfer to line 2 of your 2019 Form 8606 to be used to determine the taxable amount of your 2019 Roth conversion.

If 2018 TurboTax is not showing the $5,500 on line 2 of the Form 8606, revisit the Traditional IRA contribution section, answer Yes, you made and tracked nondeductible contributions to your IRA, then enter your $5,500 of basis carried into 2018 from 2017 (the amount shown on line 14 of your 2017 Form 8606).