Timing of Pro Rata Calculations for After Tax Traditional IRA to Roth IRA Conversion
I moved all pre-tax IRA funds into a Keogh plan earlier this year and now only have after-tax (plus a little investment income) in IRAs. Goal is to move all current IRA funds into Roth IRA with as little tax impact as possible.
The question is how to do the pro-rata calculations on the IRA conversion. What dollar amount is used for the total in the IRAs?
– Total at the time of conversion to the Roth?
– Total at the end of the year?
– Some other point in time (as in the end of the previous year as with RMD calculations)?
Thanks
Permalink Submitted by Alan - IRA critic on Thu, 2021-09-23 23:43
You may want to look at Form 8606, which calculates the taxable amount of a conversion. If you did not make a non deductible contribution for 2021 and converted your entire remaining non Roth IRAs, the taxable amount of the conversion is the amount converted less your IRA basis shown on your last filed 8606. The year end value for 2021 is not a factor since it will be 0. The conversion is reported in Part II of Form 8606.
If you did make a non deductible contribution for 2021, then Part I of the 8606 will calculate the taxable amount, and then it is transferred to Part II.