TransWikia.com

Tax on backdoor conversion - 1099R

Personal Finance & Money Asked by DSKim on June 8, 2021

In 2020, I deposited $7,000 (after-tax) in my Traditional IRA (Vanguard) account and then converted them into Roth IRA. One mistake I made was that for my age, the limit for backdoor conversion was $6,000 but I accidentally converted all of $7,000.

I have a couple of questions.

  1. I received 1099R from Vanguard. Surprisingly, all of $7,000 was reported as Texable amount (Box 2a). How can I notify that I already paid a tax on $7,000 and $6,000 should be considered as backdoor conversion? Should I submit 8606? Or, should I contact Vanguard to amend 1099R?

  2. For $1,000 which I accidentally converted beyond $6,000 limit, I guess it would be considered as early withdrawal. In that case, should I still pay a tax? Again, this was after-tax.

My CPA has no idea of how to handle this situation. I am trying to find an answer myself.

Key information from the comments:

  • Info on the 1099-R. Box 1 and Box2a has $7,000.09. Box 7(Distribution code) is 02. Box 2b (Taxable amount not determined and Total distribution) is checked. IRA/SEP/SIMPLE box is checked. Other than them, the others are empty.

  • I just checked my vanguard account. For 2019 tax year, there is indeed form 5498. It says $1,000 contribution. It was non-deductible and I didn’t file Form 8606

  • One thing I found is that I made the non-deductible contributions in the following dates in 2020 — $1,000 (Jan 16) and $6,000 (Oct 28~Nov 20) I immediately did a conversion to Roth IRA after each contribution.

One Answer

One mistake I made was that for my age, the limit for backdoor conversion was $6,000 but I accidentally converted all of $7,000.

The $6,000 limit is for contributions. There is no limit for conversions.

Since the 1099-R only references a conversion of $7,000 that means that theee were no gains or losses.

Don't worry that the form 2a has a value of $7,000, that is because you are going a conversion.

The tax form you submitted in April(?) 2020 should have included the non-deductible contribution of $1,000. This years tax form should also include the $6,000 non-deductible contribution.

The 1099-R shows what happened to those funds. In the end you will not have to pay any additional taxes, nor will you be deducting any of this from your taxes.

Correct answer by mhoran_psprep on June 8, 2021

Add your own answers!

Ask a Question

Get help from others!

© 2024 TransWikia.com. All rights reserved. Sites we Love: PCI Database, UKBizDB, Menu Kuliner, Sharing RPP