IRA Contribution in 2010 for 2009
I contributed $10,000 this year to a TIRA. Half was for 2009 and half was for 2010. I then converted those amounts to a Roth. In 2009 I had a roll over IRA account but in 2010 I will not. (I have rolled that over into my 401k this year). When doing my taxes for 2010, will the $5000 for 2009 need to be pro rated along with the money that was in the roll over IRA in 2009 on form 8606?
Permalink Submitted by Alan Spross on Sat, 2010-08-07 02:22
No.
If both the 09 and 10 regular contributions were non deductible, your conversion will be tax free. You needed to file an 8606 on your 2009 return to show the non deductible contribution. Your 2010 8606 would report the 2010 non deductible contribution and bring forward your 5,000 non deductible basis from the 2009 8606, but it will not show the amount you transferred to the 401k. The result is that the entire 10,000 conversion would be from tax free basis, and would be reported on the same 2010 8606. This assumes you had no other TIRA balance besides the one you disclosed in your post. If you follow the 8606 Inst correctly, this is the result you should generate.
Since your conversion would be tax free, you would opt out of the two year deferral for reporting 2010 Roth conversions. You would therefore be done with all the reporting for this with your 2010 return.
Permalink Submitted by Janet Ulrich on Sat, 2010-08-07 11:43
[quote]”You needed to file an 8606 on your 2009 return to show the non deductible contribution. Your 2010 8606 would report the 2010 non deductible contribution and bring forward your 5,000 non deductible basis from the 2009 8606, but it will not show the amount you transferred to the 401k”. [/quote]
Alan, thank you for you reply. All monies were non deductible. But for clarification, the roll over to the 401k took place in 2010. Would your answer be the same in this case?
Permalink Submitted by Alan Spross on Sat, 2010-08-07 18:42
Yes.
Line 6 of Form 8606 is where you will show the year end value of your TIRA, SEP or SIMPLE IRAs as of 12/31/2010. The rollover you did to the 401k will no longer be in the year end value. The 8606 Inst for that line confirm that you do not include the value of a rollover from an IRA to a qualified plan.
If you showed that value it would defeat the purpose of doing the rollover, which was to eliminate the pre tax balance of your IRAs, leaving behind only the basis that you could then convert tax free. You might have a few bucks in earnings that would be taxable if generated between the time you did the rollover to the 401k and the date you converted the rest to the Roth.