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Traditional IRA funded in December, but backdoor conversion to Roth in January...


PaulT
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Hello, new to the forum and new to the concept of a backdoor Roth.

Over 50 years old with a combined household income of over $203K. Already maxing out our 401K's and was looking at catching up more on retirement funding (better late than never). Was suggested by Fidelity to try a backdoor Roth. Told it only takes two days for the funds to secure and then can perform the rollover, so waited until Dec. 28th to fund the Traditional IRA with $7K. Still in time to complete the conversion before the end of the year, I believed. But Fidelity took over a week before allowing the conversion, pushing the conversion into 2021. 

Question #1: The Traditional IRA was my only Traditional IRA and was funded with after-tax dollars. We make too much too attempt to try to deduct the contribution from our taxes, instead the desire is just to build up the Roth IRA over the next several years using the back door method. The Traditional IRA was only funded for a week and made no money so only the base $7K was converted to a Roth IRA. During the conversion, I was asked if I want to pay taxes on the money now (withhold) or later. I chose not to withhold. I am assuming that the withholding and paying of taxes is only for people who have either made a profit on the investment or have previously deducted this on their taxes. Is this correct thinking? 

Question #2: As I said, I want to contribute the maximum ($7K) every year into the backdoor Roth. What are my options for 2021? What is the important date here?

Question #2B: In other words, what it the difference between two people, one who both contributes to a Traditional IRA and completes the backdoor conversion to a Roth IRA in December, and another person (me) who contributes to a Traditional IRA in December, but fails to convert it to the Roth until January? Are both people able to wait until, say late February,  and refund the Traditional IRA with another $7K and convert it a week later in early March and have the December/January transaction count toward 2020 and the February/March one count as 2021? 

Question 3: Form 8086. Is this form needed now every time I file taxes so that I don't have to pay taxes on the $7K that I used to fund the Traditional IRA with after tax dollars?

Thank you in advance for any help. I searched for this exact situation in the forum, but couldn't locate the same question.

Paul

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Question #4: Really what I want to know is what is the maximum amount per year I can contribute to an IRA and can convert from traditional to Roth. I know the maximum contribution amount. It is $7K for those over 50 to either a traditional IRA or a Roth IRA or split any way I want across both (if you qualify). And since my 2020 contribution was in December and and 2021 contribution will be in February, I assume that I am fine with how I contributed, which will be $7K in each calendar year. But can I perform the backdoor conversion twice in one year? I mean $7K in January (that was contributed in December) and another $7K converted this March, that will be contributed in late February? 

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Answer found!

After taking a nap and then searching harder on the Internet, I found somebody who really knows this topic well. I found a Youtube video by a doctor named James M. Dahle. 
The video is titled: "
Backdoor Roth IRA (How to Fill Out IRS Form 8606)" and in it he covers the situation I have where the investment and conversion are in different calendar years.
Backdoor Roth IRA (How to Fill Out IRS Form 8606) - YouTube

He has a web site geared to investing for medical professionals:
Home | White Coat Investor

Finally, on his web site he has an article called: "17 Ways To Screw Up A Backdoor Roth IRA."
17 Ways To Screw Up A Backdoor Roth IRA | White Coat Investor

My mistake is #3 on his list. But it is not really too big of a mistake. It results in more complex paperwork than if I had made the contribution and then the conversion in the same calendar year. But my worry was that I might lose a year of taking advantage of the Roth IRA backdoor for a year or that I might have some tax to pay, and that is not the case. It seems I did well to get my contribution in by the end of the year. From now on on will make my contribution and do the conversion in the same year so I can keep it simple on Form 8606.

Well, thanks Jim D. for making excellent videos and articles. (Should you ever find your way to this forum.) Your explanations are clear and comprehensive. I recommend readers of this forum check out Dr. Jim's material on backdoor Roth IRA's. Very informative. I read about backdoor conversions on Motley, Schwab, Investopedia, Forbes, Fidelity, etc., and none of them covered the scenarios that Jim does. They all explain the Pro-Rata Rule quite well, but they didn't talk about situations such as missing the end of the year for both contribution and conversion, or my case like making the contribution, but missing the conversion. I am happy now!

Paul

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Thank you for following up with the answers.  My understanding (and I'm new to this, so please don't take it as expert!) is that the conversion can happen at any time for any amount. The real "limit" is the 6k or 7k (if over age qualification) contribution limit on "new money in" for any given year.  Which would mean that you can still convert the 2021 Traditional IRA contribution to Roth today or any time, regardless of when you converted the 2020 Traditional IRA contribution.  Perhaps that is what you concluded as well, but wanted to clarify for my own understanding also.

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