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Financial Planning / Tax Strategies
|Subject: Re: Converted Just One of Two IRAs to a Roth||Date: 7/23/2013 4:19 PM|
|Author: TMFPMarti||Number: 118910 of 121061|
- I am embarrassed to say that I just reread my original post to discover I had omitted stating that both my nondeductible 2012 IRA contribution and the conversion to my Roth were transacted in February, 2013.
No problem. That actually makes things easier.
The only thing to report on your 2012 return is your traditional IRA contribution made in 2013. You do this in part I of Form 8606. It doesn't affect any of the numbers on your 1040.
Since the conversion and recharacterization of the conversion were both done in 2013 you'll not report anything on those until your 2013 return.
In 2013 you recharacterized that 2012 conversion and the earnings on it back to your traditional IRA.
- Yes. The recharacterization transaction went through on April 16, 2013. Then in June, 2013, I again converted the entire IRA (2012 contribution + earnings) to my Roth.
I hope this is the first time you've mentioned the reconversion, because you can't do that! Well, you can do it, obviously, but it's illegal and won't count as a conversion. It is a failed conversion, which counts as a Roth contribution, which I think we've established you can't make because of your income. If you do a conversion in 2013 and then recharacterize it the earliest you can reconvert is 1/1/2014. See "recoversions" in Pub 590.
Just to be sure here, I am correct in saying that your income was too high for a 2012 Roth contribution and will again be too high for 2013?
So, here's what you need to do:
1. Recharacterize the second conversion and the earnings on it back to traditional. I'll sleep better if you report back that you've done it.
2. You may, if you're eligible and so inclined, make your 2013 contribution at your leisure.
Other than that, do nothing until January, and then only after checking in first with the details of what you want to do.
Now on to the TurboTax problem.
You should have received one 2012 1099-R. Box 1 should be the amount converted from traditional IRA to Roth IRA. Please advise what the code in Box 7 is. There should be no other 2012 1099-R's in your possession. Please advise if this is wrong, along with all details from the "new" 1099-R('s).
- I received no 1099-R for 2012, and assume I will receive one in January, 2014 for the 2012 IRA contribution that I did not make until February, 2013
Kinda, sorta, not really. You'll get a 2013 1099-R not for the contribution, but for the conversion. In fact, you'll get two of them, one for each conversion.
- Under the circumstances, am I right in thinking I should report my 2012 IRA nondeductible contribution made in February, 2013, on my 2012 Form 8606? I have tentatively entered the contribution on Form 8606 as follows: Lines 1, 5000; 2, 0; 3, 5000; 4, 5000 5, 0; 14, 5000.
Almost right. Since you didn't take a distribution or make a conversion in 2012, leave lines 4 and 5 blank. Otherwise, this is correct.
I cannot for the life of me figure out what's triggering a TurboTax penalty. Without the information about the penalty I asked for last time my best guess is that you've convinced TT that you made an unallowed $5,000 Roth contribution (or you told it about the failed reconversion in the wrong tax year), and it's generating a $300 (6%) excess contribution penalty. If you provide the missing info about the penalty I'll take a stab at it.
In proofing this post I came to the realization that you might be confused about when transactions can be made for a tax year. The rules are different for contributions and conversions. We'll use TY 2013 for examples.
You can make a TY 2013 contribution any time between 1/1/2013 and 4/15/2014. You can recharacterize a TY 2013 contribution any time before 10/15/2014.
You can do a TY 2013 conversion any time during calendar year 2013. You can recharacterize a TY 2013 conversion any time before 10/15/2014.
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