The Backdoor Roth is one of the best tax savings strategies available in 2023, but it requires some additional paperwork to do correctly.
Michael Johnston, host of the Tax Efficient Investor podcast, walks through the correct way to fill out this form in 4 different scenarios.
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IRS Form 8606 is a crucial document for those looking to make a backdoor Roth IRA contribution. Filling out this form correctly is essential to avoid penalties and ensure compliance with IRS rules. If you’re planning to make a backdoor Roth contribution in 2023, here is a step-by-step guide on how to fill out IRS Form 8606.
Step 1: Gather your information
Before you start filling out Form 8606, make sure you have all the necessary information on hand. This includes details of any traditional IRA contributions, Roth IRA conversions, and nondeductible IRA contributions made during the tax year.
Step 2: Complete Part I
In Part I of Form 8606, you need to provide your personal information, including your name, address, and Social Security number. You also need to indicate whether this is your first year making a nondeductible contribution to an IRA.
Step 3: Fill out Part II
In Part II of Form 8606, you will report any contributions made to traditional and Roth IRAs during the tax year. If you made a nondeductible contribution to a traditional IRA as part of a backdoor Roth conversion, you will need to list this amount here.
Step 4: Complete Part III
In Part III of Form 8606, you will calculate the taxable portion of any Roth IRA conversions made during the tax year. This includes any earnings on the nondeductible contribution made to the traditional IRA, as well as any other IRA balances.
Step 5: Double-check your calculations
Before submitting Form 8606, make sure to carefully check all your calculations to ensure accuracy. Incorrectly reporting IRA contributions or conversions can result in penalties or rejections from the IRS.
Step 6: File your taxes
Once you have filled out and double-checked Form 8606, you can include it with your tax return. The information provided on this form will help the IRS determine the tax treatment of your backdoor Roth IRA contribution.
Remember, making a backdoor Roth contribution can be a beneficial strategy for high-income individuals looking to maximize their retirement savings. However, it’s essential to follow IRS rules and properly report these contributions to avoid any potential issues. By carefully filling out Form 8606, you can ensure compliance with IRS regulations and make the most of your retirement planning efforts.
Thank you so much for making this video. I finally understand this. I was hung up on line 22 and 24, but you helped me realize that is part 3 , and part 3 is just for distributions.
No scenario with line 4 filled? When you covered scenario 1, you said that you will have a scenario where line 4 will be filled, but none of the scenarios have line 4 filled. Should it be filled in scenario 2, "Late contribution?"
Excellent tutorial. Can you reclassify 401K money that has been rolled into an IRA back to a 401K?
Thank you so much for the super clear explanations that covers various cases. It is very helpful!
thanks
I have 335K in Rollover IRA from my old job. I want to do backdoor Roth IRA this is year for 2023. Do I have to treat rollover IRA as traditional IRA? And put the existing investment in form 8606?
2 Questions: I'm married filing jointly and did a back door Roth in my name. 1) I plan to do a 8606 but does my wife also need to do a separate one? 2) If so, does she just enter zeros or use the same data I populated in mine?
Scenario 2 is me, thank you so much!
Great video, what happens in a scenario that I deposited 6500 max to traditional and before converting to Roth it earned 10$ interest in the same year and I ended up converting the entire 6510 to Roth to zero out the traditional balance at end of year?
Thank you so much!
scenario 4 is me
but a few more complicated tweaks.
thank you as i venture off into another week of, i hope i'm doing my taxes right
What if I did a back door Roth conversion in 2022 but never filled out the 8606? I didn’t know I had to fill it out until now for 2023.
@OpportunityDb Question on Scenerio #2: I did a late Traditional IRA $6500 contribution for year 2023 and also made Traditional IRA $7000 contribution for year 2024. Both were done this year on 1/15/2024. I then converted the full $13,500 to ROTH IRA on 1/16/2024. I have followed your instruction and completed 2023 Form 8606. I don't see 2024 Form 8606 in the IRS website. Do I complete that this year for my 2023 tax return? Or is it not be completed until 2025 for my 2024 tax return?
How to report withdrawal prior year Roth excess contributions, please help
You are so great . How to report prior years excess Roth IRAs withdrawal ( distribution ） ?
I am doing a late backdoor. I will do it this month, and I see I fill out that first form, do I send that form in with my taxes I fill out for 2023 or just hold on to it and file it with the other contribution for 2024. So, contribution 6,500 this month and do the simple first 8606 form, do I send this form in with my taxes for 2023, or just wait until I do my taxes next year in 2025 for 2024. But, learn my lesson and do another contribution in December 2024 for 2024, and two forms are turned in with my 2024 taxes?
Question: I like to do 401-k (not a Roth 401-k plan) conversion. Do I need to fill out Form 8606 for 401-K roth conversion?
Can you upload a video where you made late contributions for 2 years in a row?
Thank you finally a great explanation