How to convert a Traditional IRA contribution from 2016

Question

Here's some background information about Dave

For 2016, Dave has

1. Worked for a company (say, Employer A) that offered a 401k and he contributed to it. Say the balance of the 401k is $30k.
2. Also contributed, say $5000 to a traditional IRA for the same year.
3. Paid about $300 in additional tax to the IRS for the excess $5000 contribution to the IRA (Form 1040 #59 Additional tax on IRAs, other qualified retirement plans, etc)
4. The filing included a Form 5329 documenting the excess contributions (Line 15, 16,17 were $5000 (excess), $5000 (total) and $300 (tax) respectively)
5. Has not claimed a deduction for the $5000
6. Left Employer A in Dec 2016

For 2017, Dave has

7. An income that disqualifies him from contributing to a Roth IRA
8. Joined an employer (say, Employer B) for this year that did not offer a 401k
9. Has NOT converted any of these $5000 in to a Roth IRA in 2017.
10. Has contributed about $5500 towards a traditional IRA
11. Has NOT converted any of these funds to a Roth IRA in 2017
12. Has rolled over $30k from Employer A to a traditional IRA. The money left the financial company at the end of Dec. 2017 and was received by the new firm in 2018.

Now, Dave is about to file taxes for 2017. #12 appears to be a big mistake as I read that I could have rolled over $30k directly to a non deductible IRA and then convert it to a Roth IRA without any tax consequences.

In Dave's current situation, how can he convert all of these funds to a Roth IRA in 2018 with the least amount of tax consequences for 2017 and 2018?

Answer 1

For 2016, Dave did not claim a deduction. His $5000 IRA deposit was just a non-deductible deposit. No 6% penalty.

He should amend the 2016 return. The penalty was not required, and he now has one traditional IRA, total deposits $40,500 (?) with a $5000 non-deducted amount.

Agreed that he should have converted that $5000 to Roth in 2017. That's behind us now.