How to file taxes for a backdoor Roth and 401(k) roll-in

Question

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).

Answer 1

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.