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Old 02-24-2018, 08:52 PM
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form 8606 and roth conversion

In the past 3 years, my wife has been making non-deductible traditional IRA contributions (our income is too high for the deductible contribution) and converting it to Roth promptly. As a result, we receive 1099-R and we file 8606. It's been pretty straightforward so far because the total basis is $5,500 (max annual contribution) which would then get converted to Roth. And we didn't have any taxable amount from the distribution. We did this because we thought that we didn't have any additional traditional IRA other than these recent contributions.

In 2017, however, we discovered that my wife had a long-forgotten traditional IRA account (the brokerage notified us), and I think this complicates things a little. This was supposedly a deductible contribution.

Its value as of 12/31/2017 was $1,736, and I think this needs to be reflected in line 6 of form 8606, and I suspect that this might lead to a taxable amount from this distribution in line 15c. Is that the right understanding? If I follow that instructions, it sounds like the taxable amount comes out to be around $1,320. I'd like to confirm that is the right result.

FWIW, I tried to do this with TurboTax, but somehow TurboTax does not include this in form 8606...



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Old 02-25-2018, 02:21 AM
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In the past 3 years, my wife has been making non-deductible traditional IRA contributions (our income is too high for the deductible contribution) and converting it to Roth promptly. As a result, we receive 1099-R and we file 8606. It's been pretty straightforward so far because the total basis is $5,500 (max annual contribution) which would then get converted to Roth. And we didn't have any taxable amount from the distribution. We did this because we thought that we didn't have any additional traditional IRA other than these recent contributions.===========> You?re right that the tax situation is very different depending on how you?ve made your IRA contributions. If all of your IRA contributions are tax-deductible, then the calculation is simple: The entire conversion is taxable. But if some of your contributions are nondeductible, the calculation gets trickier. In that case, you don?t have to pay taxes on the portion of the conversion that was from nondeductible contributions because you have already paid taxes on that money.

In 2017, however, we discovered that my wife had a long-forgotten traditional IRA account (the brokerage notified us), and I think this complicates things a little. This was supposedly a deductible contribution.=========> as said, You can convert the contributions to a Roth IRA; however, a portion of the amount you convert to the Roth will be subject to income tax. When your Traditional IRA balance consists of deductible and non-deductible contributions, any amount distributed or converted from the Traditional IRA is pro-rated to include a taxable and non-taxable portion of the assets


Its value as of 12/31/2017 was $1,736, and I think this needs to be reflected in line 6 of form 8606, and I suspect that this might lead to a taxable amount from this distribution in line 15c. Is that the right understanding? If I follow that instructions, it sounds like the taxable amount comes out to be around $1,320. I'd like to confirm that is the right result.========>Sorry I can not give you tax calculation advice; if you want you may contact an IR Enrolled Agent/A CPA doing taxes in your local area for your fed/state returns.



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Old 02-25-2018, 08:02 PM
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Thanks wnhough!



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