BackDoor ROTH IRA conversion (=how much is my Basis going forward to next year?)
I did a Back Door ROTH Conversion for the first time in 2022. ($6,000)
The Tax Software I’m using has language as shown below.
(The part of their language referencing “Less Withdrawals or Distributions” has me puzzled (does this include “Conversions” or not??)
MY Question to you is: = “Since I converted ALL of the $6.000 to a ROTH, DO I HAVE A BASIS going forward to NEXT YEAR when I do another Back Door ROTH conversion? – or is my basis now $0 since I converted it all)?
thank you.
Nondeductible IRAs – Basis in Traditional IRAs:
(Enter the total of all nondeductible contributions that were made to your traditional IRAs in all years prior to 2022 less any withdrawals or distributions of nondeductible contributions in those years.)
Prior years basis in traditional IRAs = $????
Permalink Submitted by Alan - IRA critic on Sun, 2023-02-26 19:18
Was the contribution you made in 2022 for 2021 or 2022? Was the total balance of all your non Roth IRAs at the end of 2022 zero?
Permalink Submitted by Rob Layman on Mon, 2023-02-27 17:49
It was for 2022. And my non-ROTH IRA balance at the end of 2022 was $10 (due to interest earned in the few days before I rolled over the $6,000. (btw: after I posted this, I filled out my 8606 and I believe I answered my own question. (=my “BASIS” for next year (2023) will be the $10 as shown on line 14 of this year’s 8606 – correct?) thanks
Permalink Submitted by Alan - IRA critic on Mon, 2023-02-27 17:57
Yes, but if you converted only 6000 and not the entire value of the IRA, about $10 of your conversion will be taxable as you will only be using 5990 of your basis in the conversion due to pro rating.