Roth conversion
When converting a traditional IRA to a Roth I assume I do not have to pay income tax on the monies I have previously paid tax on when the monies were contributed to the traditional IRA “due to income limitations”.
When converting a traditional IRA to a Roth I assume I do not have to pay income tax on the monies I have previously paid tax on when the monies were contributed to the traditional IRA “due to income limitations”.
Permalink Submitted by Alan Spross on Mon, 2010-01-04 22:03
Correct, there is no double taxation. When you made the non deductible contribution to the TIRA, you should have filed Form 8606 each year reporting the amount of the contribution and updating the cumulative total.
Form 8606 is also used to report your Roth conversion and it calculates how much of that conversion is taxable due to your basis from prior non deductible contributions. The pro rate factor is based on the ratio of your non deductible contributions to the adjusted year end TIRA balance. You cannot elect to convert all your non deductible contributions first, and therefore once you have made these non deductible contributions, every conversion or distribution thereafter is prorated to determine the taxable amount.
If you did not file the 8606 each year you made non deductible contributions, you can research the amount you contributed and file the forms retroactively. THe IRS has been accepting these retroactive forms without penalty.