This tutorial video walks you through how to report a LATE BACKDOOR ROTH IRA on TurboTax, step by step, with a correct example of FORM 8606 shown.

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🔴 Disclaimer
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The author of this video is not a certified financial advisor nor a tax expert. Please consume this video for educational purposes only and not take it as professional financial advice.

🔴 Summary
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A “BACKDOOR ROTH IRA” conversion is a popular technique high-income earners in the USA can use to work around the ROTH IRA contribution restrictions due to income limits. A late backdoor ROTH IRA is possible due to the late deadline for Traditional IRA contributions. Specifically, one has until April of year X + 1 to contribute to a Traditional IRA of year X. This creates a very tricky tax reporting situation.

Form 8606 will need to be filed differently on year X and year X + 1.
The video walks through them and also shows how to use Turbotax to do those reportings.

🔴 Timestamps
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0:00 – Introduction and agenda
0:42 – (1) What is a Late Backdoor Roth IRA
1:38 – (2-1) Form 8606 tax reporting overview
3:02 – (2-2) Form 8606 walkthrough for year X-1
4:38 – (2-3) Form 8606 walkthrough for year X
14:14 – (3-1) Turbotax walkthrough for year X-1
16:22 – (3-2) Turbotax walkthrough for year X

🔴 Other
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White Coat Investor Blog on Late Backdoor ROTH IRA:

Taxable IRA distribution worksheet:

#lateBackdoorRothIra #turbotax #form8606…(read more)

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As tax season approaches, many individuals are looking for ways to maximize their retirement savings and reduce their tax burden. One strategy that has become increasingly popular in recent years is the Backdoor Roth IRA. This approach allows high-income earners to contribute to a Roth IRA, even if their income exceeds the traditional contribution limits. However, the process can be confusing and requires careful attention to detail to avoid unnecessary tax penalties. In this article, we will walk through the LATE Backdoor Roth IRA tax process using TurboTax and the Form 8606.

Before diving into the process, let’s review what a Backdoor Roth IRA is and why it has become a popular strategy. A Roth IRA is a retirement account that allows you to make after-tax contributions, which then grow tax-free and can be withdrawn tax-free in retirement. However, there are income limits for who can contribute directly to a Roth IRA. In 2021, the income limits are $140,000 for individuals and $208,000 for married couples filing jointly. If your income exceeds these limits, you are not eligible to contribute directly to a Roth IRA.

This is where the Backdoor Roth IRA comes in. Essentially, you contribute to a traditional IRA, which may or may not be tax-deductible depending on your income and whether you have access to a retirement plan through your employer. Then, you convert the traditional IRA to a Roth IRA, which allows you to take advantage of the tax-free growth and withdrawals. By doing this, you effectively bypass the income limits for contributing directly to a Roth IRA.

Now let’s walk through the LATE Backdoor Roth IRA tax process using TurboTax and the Form 8606. It’s important to note that if you missed the deadline to make a Backdoor Roth IRA contribution for the previous tax year, you must file an extension and make the contribution by the deadline of the extension (typically October 15th). Otherwise, you will have to wait until the following year to make your contribution.

Step 1: Contribute to a traditional IRA.

Assuming you are eligible to make a Backdoor Roth IRA contribution, the first step is to contribute to a traditional IRA. You can do this through your preferred financial institution, such as Vanguard or Fidelity. The maximum contribution for 2021 is $6,000, or $7,000 if you are age 50 or older.

Step 2: Convert the traditional IRA to a Roth IRA.

Once you have made your traditional IRA contribution, you will need to convert it to a Roth IRA. This process can also be done through your financial institution’s website or by contacting their customer service department. You will need to provide them with the amount you are converting and the account information for your traditional IRA.

Step 3: Complete Form 8606.

Now it’s time to complete Form 8606, which is the form used to report your Backdoor Roth IRA contribution and conversion. TurboTax can automatically generate this form for you based on the information you provided during the conversion process.

On the form, you will need to report the total amount of your traditional IRA contribution, the amount you converted to a Roth IRA, and any previous conversions you may have made in previous years. Additionally, you will need to calculate the taxable portion of your conversion, which is the amount that was not previously taxed as part of your traditional IRA contribution. TurboTax can help you with this calculation.

Step 4: File your taxes.

Finally, you will need to file your taxes, including the completed Form 8606. TurboTax will help you with this process and ensure that you are taking full advantage of any tax benefits available to you.

One important thing to note when making a Backdoor Roth IRA contribution is that if you have any other traditional IRAs, including rollover IRAs, the tax implications can become more complicated. This is because the IRS considers all traditional IRAs as one account when calculating the taxable portion of a Backdoor Roth IRA conversion. If you have other traditional IRAs, it is important to consult with a tax professional to ensure you are following the correct procedures and minimizing any tax penalties.

In conclusion, the Backdoor Roth IRA is a powerful tool for high-income earners to maximize their retirement savings and reduce their tax burden. However, it requires careful attention to detail and a thorough understanding of the tax implications. By following the LATE Backdoor Roth IRA tax process using TurboTax and the Form 8606, you can ensure that you are taking full advantage of the benefits available to you.