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How to report backdoor Traditional to Roth conversion

lefty
Level 3

taxpayer in california had a traditional IRA and did a backdoor Roth conversion in 2020.

He was told he needs to  fill out a 8606 form but I am really struggling with how to enter this.

There's no 1099-R, was he supposed to get one?

Help!!!

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qbteachmt
Level 15

"There's no 1099-R, was he supposed to get one?"

Yes. 1099-R is for money Out. Are you sure it isn't available from the account brokerage or financial institution, such as from online? He might not know he needs to "go get it."

A conversion is the same as Distribution + Rollover, but the change in nature of account is why it's called Conversion.

BackDoor simply means: Basis in a sheltered account is moved to a tax exempt account quickly enough that there are no earnings or any deferred amounts that need to be taxed.

If they had any funds other than Basis in that Trad IRA account( or any of the similar account types as listed by the IRS), then this is not BackDoor, but a Partially Taxable conversion.

You stated "in 2020." Does this means they made a nondeductible contribution and converted it all in 2020? Or, are you describing they made the contributions for 2020 but in 2021 and then converted it, which means the 1099-R won't be out until 2021.

You would still prepare form 8606 and enter that this was Basis. A lot of people forget Basis on the 8606.

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"Level Up" is a gaming function, not a real life function.

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qbteachmt
Level 15

"There's no 1099-R, was he supposed to get one?"

Yes. 1099-R is for money Out. Are you sure it isn't available from the account brokerage or financial institution, such as from online? He might not know he needs to "go get it."

A conversion is the same as Distribution + Rollover, but the change in nature of account is why it's called Conversion.

BackDoor simply means: Basis in a sheltered account is moved to a tax exempt account quickly enough that there are no earnings or any deferred amounts that need to be taxed.

If they had any funds other than Basis in that Trad IRA account( or any of the similar account types as listed by the IRS), then this is not BackDoor, but a Partially Taxable conversion.

You stated "in 2020." Does this means they made a nondeductible contribution and converted it all in 2020? Or, are you describing they made the contributions for 2020 but in 2021 and then converted it, which means the 1099-R won't be out until 2021.

You would still prepare form 8606 and enter that this was Basis. A lot of people forget Basis on the 8606.

*******************************
"Level Up" is a gaming function, not a real life function.

View solution in original post

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lefty
Level 3

thank you so much for your quick response!

he made contributions in 2021 FOR 2020 then immediately converted it to a Roth (during 2021).

You helped me realize he wont get the 1099-R until end of 2021 and therefore there's nothing that needs to be done on his 2020 tax return relating to the conversion.