Retired 60 yo, rolled over $8007 from 403b to Trad IRA in backdoor Roth IRA conversion in 2024. Paid $1761 in taxes from amt. How do I access form 8606 & avoid 6% penalty

Forum|Forum|1 year ago
February 14, 2025
1 reply
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No earned income, just pension; Trad IRA acct is empty due to conversion & paying taxes up front. Planning another backdoor Roth conversion in 2025. What should I do differently?

DanaB27

To clarify, you rolled over funds from the 403b to Traditional IRA and the converted this to Roth IRA?

You do not enter the rollover or conversion as IRA contribution. Just enter your Form 1099-R and answer the follow-up questions carefully.

Please be aware, you can only make IRA contributions if you have taxable compensation. If you do not have earned income and make IRA contributions you will have an excess contribution.

Excess contributions are taxed at 6% per year for each year the excess amounts remain in the IRA. The tax can't be more than 6% of the combined value of all your IRAs as of the end of the tax year.

To avoid the 6% tax on excess contributions, you must withdraw:

the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
any income earned on the excess contribution (IRS).

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lb80Author

Thank you for your response; you understood the question. However, once the money was ROLLED over into the Trad IRA it was IMMEDIATELY converted to the Roth IRA leaving an empty Trad IRA acct and received a 1099-R. I called myself trying to pay the taxes up front on the Roth IRA out of this money.

I want to do another backdoor Roth conversion for 2025. What should I do differently? I have no earned income.
Grateful for your assistance!

DanaB27

To clarify, a backdoor Roth conversion means making nondeductible contributions to the traditional IRA and then converting it to the Roth IRA. But since you have no earned income you cannot make any traditional IRA contributions.

Or are you saying you want to move more funds from the 403b to the Roth IRA? If you only have pre-tax funds in the 403b then the conversion to Roth IRA will always be taxable.

Any withheld federal taxes will be carried to line 25b of Form 1040 and applied towards any taxes due.

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