Back door Roth conversion
My client funded her Traditional IRA today. Now, she has to move it over to her Roth. The money won’t be available until 07/16.
Is the 07/15 deadline for funding the IRA or does it pertain to the backdoor conversion as well?
Permalink Submitted by Alan - IRA critic on Fri, 2020-07-10 15:40
The deadline of 7/15 just applies to making 2019 contributions. The conversion can be done anytime thereafter, preferably soon after the contributed funds are available to convert.
Permalink Submitted by Robert Roselli on Fri, 2020-07-10 15:47
The client had their taxes completed on 07/02. If they had them done with the assumption that it would be converted by 07/15, and thus be 2019 income and now we can’t get it done until 07/16. Will this change anything? or is that it will be 2020 income regardless?
Permalink Submitted by David Mertz on Fri, 2020-07-10 15:58
A Roth conversion performed anytime in 2020 is reportable on the client’s 2020 tax return, not on the client’s 2019 tax return. It’s not 2019 income.
Permalink Submitted by Alan - IRA critic on Fri, 2020-07-10 16:02
The conversion will be in 2020 and therefore the conversion can only be reported on the 2020 return, Form 8606. The 2019 return however will need to report only a non deductible contribution (if it was not deducted) on a 2019 Form 8606. Even if the 2019 return did not report the non deductible contribution, a stand alone 8606 for 2019 could be sent in by year end showing the contribution. But if the contribution was deducted, please advise. Typically, the contribution is non deductible.
Permalink Submitted by Robert Roselli on Fri, 2020-07-10 16:14
The $ 7,000 contribution was non-deductible. I will check in with their accountant. Thank you very much for the prompt response.