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In 2019, I did a backdoor Roth IRA conversion that went off without any problems (put $6000 into traditional IRA, converted to Roth IRA). In 2020, I was looking to do the same, but I hit a snag.

I made the 2020 contribution and conversion in the last couple weeks of the year, and due to holiday delays and such, the conversion step didn't register on Vanguard until January. So, I have a contribution in 2020 and the conversion now in 2021.

So, I was wondering if anyone here has been in a similar situation or can advise on a few things that are somewhat unclear to me:

  1. For reporting, I was following a guide (https://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html). The guide indicates that I should report the traditional IRA contribution on my 2020 tax return, but wait until 2021 to report the conversion. Is that correct?

  2. Will I owe more in 2021 because of this situation? In Turbo Tax, entering the conversion greatly increases the "tax due" until you enter the contribution later on, which reverts the "tax due". But in this case, for 2021, it seems I'd enter the conversion step only (which increases tax due significantly) with no contribution step to counter that. Is there another form that you fill out to indicate "this conversion relates to a contribution made the previous year so it should not be taxed?".

  3. Does this in any way affect my ability to make a backdoor contribution in 2021? My intent was to contribute/convert for 2020, and then this year do another $6000 contribute/convert. Is that problematic b/c the previous conversion did not complete before 2021? Want to make sure I don't over contribute if this situation already puts me at the 2021 max.

Any guidance or insight would be greatly appreciated! I'm definitely going to be more careful to avoid this situation in the future :P.

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This is very common and nothing to worry about.

  1. Correct, you report the non-deductible Traditional IRA contribution on Form 8606 in your 2020 tax return, then the conversion in your 2021 return.
  2. No more tax will be owed just because the conversion happens in a later year. Assuming no pro rata tax issues, taxes are always owed on how much is converted minus how much was contributed. Time is not a factor (although of course, the longer you wait, in all likelihood the more you will have to convert).
  3. This doesn't impact your 2021 backdoor Roth IRA contribution. You're still eligible to contribute to your Traditional IRA for 2021, and there are no limits on conversions.
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  • Thank you for the clarification - good to know it isn't a big deal! Sorry, one more question/clarification about reporting the conversion in 2021. Do I need to mention that the conversion is for the previous year somewhere? TurboTax asks at one point "did you make or keep track of nondeductible contributions to your traditional IRA for last year? (this is not common)" I'm guessing when I do this next year, I'd hit "yes" and tell them that "yeah, $6000 of the conversion I'm reporting is for money from last year - don't charge me for it." Does that make sense, or am I misunderstanding?
    – cmk2901
    May 9, 2021 at 19:46
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    @cmk2901 Sounds like you understand it. You'll tell TurboTax yes and then say you have $6000 of remaining nondeductible 'basis' from previous years; then it will only report the amount converted minus $6000 as taxable income.
    – Craig W
    May 9, 2021 at 20:24

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