Hi Everyone: I'm about to execute my first Backdoor Roth conversion after ~10 years of nondeductible contributions and just wanted to sanity check my understanding with the group before pushing the button. I have read the Backdoor Roth wiki article several times.
About Me
About Me
- 35% federal marginal tax bracket.
- Single, turned 50 this year. Plan to work for the next 10+ years at the same income level.
- Recently changed employers whose 401k program rules allows for external roll-ins unlike my past employers.
- Spent the last few months moving several pretax tIRA balances into my current 401k. What a pain! But it's done.
- All retirement money is now contained in two 401ks, a Roth IRA (originated in my younger years when I could contribute), and 2 HSAs. And then the sole tIRA remaining that's been 100% funded by nondeductible contributions over the past ~10 years. It's at Vanguard.
- The tIRA to be converted has a current value of $62,638. Total basis is $58,030. All past non-deductible contributions were documented in IRS 8606 forms. I know I'll owe taxes on the $4,608 gain taxed at my federal marginal rate (ouch!), but I want to execute the Backdoor Roth now while I can... I've been waiting to do this for 10 years! Past employer didn't allow roll-ins and I had a long term CD inside a tIRA that I didn't want to terminate early. But I'm now free of all that!
- I plan to pay the tax bill for the conversion out of pocket, not pulling funds from the IRA itself to cover.
- In consolidating all of my pretax IRAs into my 401k, I moved the entire balance of each only to be disappointed later when monthly/quarterly interest/gains then re-added money into those accounts. I had to move money 2, 3, 4 times per IRA to get it down to nothing. Two of them I managed to close the account - so no problem there. Two other tIRA accounts are active with $0.01 and $0.29 balances. I assume this won't be a problem in 2023 TY 8086 tax form for the Roth conversion? It should just be a rounding error (back to 100%) in the pro-rata rule, right? Or would I just ignore those miniscule balances since they're both << $1 as IRS tax forms normally do... and simply focus the 8606 on a 100% conversion of the $62,638... paying the tax on the gains.?.? I can't be the only one fighting these minor account balances.
- Once I push the button in Vanguard and execute an Exchange from the tIRA into my existing Roth IRA, I assume I just print the transaction details and use those values when creating my 2023 TY 8086 form? There's no other place/form I need to submit with Vanguard or other to denote the conversion? It's just between the IRS & me? VG isn't going to send some special tax form denoting the conversion details to myself and the IRS, since they don't really care about the nature of the contributions?
Statistics: Posted by killjoy2012 — Wed Dec 27, 2023 4:22 pm — Replies 0 — Views 21