Conversion of Traditional Nondeductble IRA Contribution to Roth IRA

  • Thread starter Dimitrios Paskoudniakis
  • Start date

D

Dimitrios Paskoudniakis

In early 2012, I wanted to contribute $5,000 to a Roth IRA for 2011, but my
income was too high, so I made the contribution to a Traditional,
non-deductible IRA, then the next day, converted it to a Roth IRA. I then
filed Form 8606 with my 2011 return. I also intend to complete Form 8606
for my 2012 return to show the conversion in 2012.

I just received Form 1099-R, which shows I took a distribution of $5,000 in
Boxes 1 and 2, and shows code 2 in Box 7, which I see means, "Early
distribution, exception applies (under age 59 1/2)". One copy of the form
states to report this income on my Federal Tax return. What income?
Another copy instructs to file it with my state return, when required.

Is this all correct? I didn't take a distribution, I converted from
non-deductible Traditional to Roth with no gain or loss.
 
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A

Arthur Kamlet

In early 2012, I wanted to contribute $5,000 to a Roth IRA for 2011, but my
income was too high, so I made the contribution to a Traditional,
non-deductible IRA, then the next day, converted it to a Roth IRA. I then
filed Form 8606 with my 2011 return. I also intend to complete Form 8606
for my 2012 return to show the conversion in 2012.

I just received Form 1099-R, which shows I took a distribution of $5,000 in
Boxes 1 and 2, and shows code 2 in Box 7, which I see means, "Early
distribution, exception applies (under age 59 1/2)". One copy of the form
states to report this income on my Federal Tax return. What income?
Another copy instructs to file it with my state return, when required.

Is this all correct? I didn't take a distribution, I converted from
non-deductible Traditional to Roth with no gain or loss.

Every time you take a distribution from a traditional IRA, the
IRA custodian takes the position hat they do not know if you
used pre-tax funds or after-tax funds, so they assume it is taxable,
and the check the box labeled Taxable amount cannot be determined.


You notify IRS it is not taxable, assuming you have no traditional IRA
with pretax amounts, by listing the nondeductable contribution on
Form 8606. You also enter the entire gross distribution on form
1040 line 15a and if none of the distribution is taxable, do not
enter it on line 15b.
 
A

Alan

In early 2012, I wanted to contribute $5,000 to a Roth IRA for 2011, but my

income was too high, so I made the contribution to a Traditional,

non-deductible IRA, then the next day, converted it to a Roth IRA. I then

filed Form 8606 with my 2011 return. I also intend to complete Form 8606

for my 2012 return to show the conversion in 2012.



I just received Form 1099-R, which shows I took a distribution of $5,000 in

Boxes 1 and 2, and shows code 2 in Box 7, which I see means, "Early

distribution, exception applies (under age 59 1/2)". One copy of the form

states to report this income on my Federal Tax return. What income?

Another copy instructs to file it with my state return, when required.



Is this all correct? I didn't take a distribution, I converted from

non-deductible Traditional to Roth with no gain or loss.
You should have completed Part I and Part II of the 8606. Part II is where the taxable amount of the distribution is computed. If the IRA in question was your only IRA account and/or you only had IRA accounts where the cost basis was equal to the balance, then the taxable amount will compute to zero.
 
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D

Dimitrios Paskoudniakis

Dimitrios Paskoudniakis said:
In early 2012, I wanted to contribute $5,000 to a Roth IRA for 2011, but
my income was too high, so I made the contribution to a Traditional,
non-deductible IRA, then the next day, converted it to a Roth IRA. I then
filed Form 8606 with my 2011 return. I also intend to complete Form 8606
for my 2012 return to show the conversion in 2012.

I just received Form 1099-R, which shows I took a distribution of $5,000
in Boxes 1 and 2, and shows code 2 in Box 7, which I see means, "Early
distribution, exception applies (under age 59 1/2)". One copy of the form
states to report this income on my Federal Tax return. What income?
Another copy instructs to file it with my state return, when required.

Is this all correct? I didn't take a distribution, I converted from
non-deductible Traditional to Roth with no gain or loss.
I filled out Form 8606 Part I in 2011, and will fill out Parts I and II in
2012 showing no taxable amount. I had no prior deductible IRA funds, all
Roth. I will show on Form 1040 Line 15a a distribution of $5000, and Line
15b a taxable amount of zero.
 

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