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I am planning to backdoor $6000 into my Roth IRA for 2019, which currently has nothing in it.

I have $2500 in a traditional rollover IRA. I was going to put it into the Roth, but due to the ordering rule for distributions, I've decided against that (I want access to my backdoored contributions in less than 5 years without paying a penalty on the $2500).

So instead, I'm going to move the traditional IRA into my 401k. Do I need to do that before I do the backdoor transaction, or can I just do both before April (June) 15th?

Will my brokerage firm fill out all the necessary forms for me for the roll-in into my 401k, and will they understand that this is for 2019 and not 2020? I can't find any info on this as I understandably find a bunch of "401k to IRA rollover" links. And do I need these forms to file my taxes?

Also, I think I need to file form 8606. Investopedia said:

you must file Form 8606 for every year you contribute after-tax amounts (non-deductible IRA contribution) to your traditional IRA

And 3oakscapital said:

When you do eventually convert your IRA assets to a Roth IRA, the IRS will assume your basis in IRA assets is $0 unless you tell them otherwise. For that reason, it's important to keep track of your non-deductible contributions each year by filing Form 8606 with your tax returns. This will establish a basis with your contributions.

If you fail to file the form, the IRS will have no record of your basis, and try to tax you twice when it comes time for the conversion. It's not catastrophic if you forget to file it one year though - this form can be filed retroactively if necessary.

The instructions for the form itself indicate I have to file:

You made nondeductible contributions to a traditional IRA for 2019, including a repayment of a qualified disaster or reservist distribution.

I'm a little confused because someone on my last question said I didn't need to file it in the event that I converted all $8500 into the Roth IRA at once (which I understand is slightly different than what I'm doing now, since the $2500 has a new destination).

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    I called my brokerage firm this morning, and this is my current understanding. The traditional IRA roll-in to the 401(k) will generate a 1099-R for the 2020 tax year. The backdoor Roth conversion will also generate a 1099-R for the 2020 tax year. I will file form 8606 for 2019 (and eventually for 2020). Since there's no limit on conversions, the 2020 1099-R for the backdoor will show $12000 (2019 + 2020). The pro-rata rule applies to 12/31. – Sam T Mar 26 at 16:49
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    I think you understand but just to be clear, the order of the rollover and contribution/conversion don't matter, as long as the rollover is done by 12/31. Regardless, probably good to do the rollover first to make sure there are no issues. – Craig W Mar 26 at 23:14
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You will be making a non-deductible Traditional IRA contribution that counts under 2019, so you will fill out 2019 Form 8606 Part I when you do your taxes for 2019, indicating a $6000 contribution. You will get a basis of $6000.

You will be making a conversion from Traditional IRA to Roth IRA during 2020, so you will need to fill out 2020 Form 8606 Part II when you do your taxes for 2020. I believe you will not need to fill out 2020 Form 8606 Part I, since you are not making a non-deductible Traditional IRA contribution in 2020, and you are converting your whole Traditional IRA into Roth IRA (after part of it was rolled over into 401(k)), so Part II will just be the conversion ($6000) minus the basis ($6000), which results in 0 taxable amounts.

Even if you fill out 2020 Form 8606 Part I, it will give the same result:

1. 0
2. 6000 (basis from 2019)
3. 6000
4. 0
5. 6000
6. 0 (value of Traditional IRAs as of December 31, 2020)
7. 0 (distributions do not include rollovers or conversions)
8. 6000 (conversions in 2020)
9. 6000
10. 1.000 (this is the after-tax percentage for the pro-rata rule)
11. 6000 (non-taxable part of conversion)'
12. 0
13. 6000
14. 0
15a. 0
15b. 0
15c. 0

So in Part II it would be line 8 ($6000) minus line 11 ($6000), resulting in 0 taxable amounts.

On your 2020 Form 1040 line for IRA distributions, in line 4a it will be $8500 (the sum of rollovers and conversions for which you will receive 2020 1099-Rs), but for line 4b it will be 0 (from your Form 8606 line 18). And you have to write "Rollover" on the dotted line next to line 4b to indicate that there was a rollover.

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  • Thanks! I filled out my 2019 8606 and 2020 8606 as an exercise earlier today. The 2019 one just has boxes 1, 2, 3, and 14 filled in (6000, 0, 6000, 6000). My 2020 form only differs because I do plan to backdoor again, also in the 2020 calendar year. So boxes 1, 3, 5, 8, 9, 11, and 13 each have an extra $6000 added on. (And I filled out part II with 12000, 12000, 0). Hadn't gotten to the 1040 part yet. I'll keep that in mind. Thanks again! – Sam T Mar 26 at 23:31

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