Rollover IRA to ROTH Conversion
Hello,
I’m new to this forum and would really appreciate if someone can answer my questions. Thanks for your help in advance.
History:
I have a rollover IRA from my previous employer = $10000
In 2009, I contributed to a non-deductible IRA September 2009 = $5000 and I reported this on Form 8606 with the 2009 tax return that was filed in April 2010.
In 2010, I contributed to a non-deductible IRA March 2010 = $5000. But I have not reported to IRS because my understanding is that you report this on form 8606 with the 2010 taxes that is due on April 2011.
In December 2010, I have converted both the Rollover IRA ($10000) and Traditional non-deductible IRA ($5000(2009)+$5000(2010)=$10000) to ROTH.
1) Is it valid to convert the 2010 contribution of $5000 to ROTH even before it is reported to IRS?
2) I have been using Turbo tax for my taxes and it says that I have an excess contribution to ROTH and need to pay penalty.
I think I did not do anything wrong because I haven’t done any excess contribution.
3) Recently in January I have again contributed $5000 towards 2011 non-deductible IRA and converted into ROTH. Is this valid?
I’m planning to see a CPA since it is getting very complicated but want to know if I did anything wrong?.
Thanks for your help
Permalink Submitted by mk foss on Fri, 2011-02-04 18:21
I don’t see any problems with what you have done.
It’s fine to convert an IRA to Roth before Form 8606 is filed to indicate that it is nondeductible.
I’m not sure how Turbo Tax is coding your contributions. If you make it clear that one was for 2009 and one for 2010 – the excess contribution message should go away. The nondeductible IRA contributions should not show up as Roth contributions so I don’t understand why you’re getting that kind of message. Check over your input – the contributions are part of a conversion to Roth not a contribution.
It’s fine to convert a 2011 nondeductible IRA contribution to Roth in 2011.
Permalink Submitted by Alan Spross on Fri, 2011-02-04 20:51
I agree.
There is another poster who was having these exact same issues with Turbotax. My guess is that a question is being answered incorrectly. Do NOT indicate that you have recharacterized any regular contribution since a conversion is an action unto itself and should not be considered a recharacterization. My guess is that you referred to recharacterization of this regular contribution as a Roth regular contribution and your MAGI was too high for that and generated the excess contribution notice.
You did nothing wrong with your IRA transactions, but I think you did in entering them in Ttax.
Permalink Submitted by sunny kota on Sat, 2011-02-05 03:39
Thanks mgtf4cpa and alan-oniras for your help.