Can I convert TIRA and nondeductible IRA in the same year?

Home Fairmark Forum Retirement Savings and Benefits Can I convert TIRA and nondeductible IRA in the same year?

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  • #5085
    jh4986
    Participant

    I have one nondeductible IRA and one Traditional IRA sitting in 2 different financial firms, and the rest of my funds are in 401K. I plan to convert both of them to Roth IRA this year because I need the income. I understand that I will pay the tax for full TIRA account, and pay tax for the portion of untaxed in my nondeductible IRA. By the end of the year, my total IRA balance will be $0. The funds will be in 2 new Roth IRAs.

    I understand each firm will send me 1099-R form for Roth conversion. I have Form 8086 filed and tracked from 2002-2010 for all my nondeductible IRA contribution. No further nondeductible contributions after 2010.

    For 2020 tax, I will need to file a new Form 8086 for both of these Roth Conversions.

    My questions is can I do both conversion to Roth IRA from 2 firms, in the same year? If so, is there any order that I have to do, say, nondeductible IRA first? I believe since the year end balance will be $0, there will not be pro-rata rule applied. The taxable amount is the full TIRA amount + portion of untaxed deductible IRA. am I correct?

    Thank you

    #5086
    Alan S.
    Participant

    Remember, the IRS views all your TIRAs as one combined account and all your Roths as one combined account for tax purposes. Your 8606 showing your total basis in non deductible contributions applies to all your non Roth IRAs.

    You can do as many conversions as you wish in any order you wish. Because there are two accounts, you will get a 1099R for each account and the total of both goes on your 2020 Form 8606. The taxable amount will be the amount that the total conversions exceed your non deductible basis shown on line 14 of the last 8606 you filed prior to this year. The result is that you are only taxed on the dollars in your TIRA that not already been taxed when contributed.

    No reason not to convert into a single Roth account unless you have a reason for wanting to maintain two of them.

    #5087
    jh4986
    Participant

    Thanks, Alan.

    I have been using TurboTax software for my return preparation. Should I manually calculate the final taxable amount adding the 2 1099-R forms (seems straightforward) before I enter into TurboTax question/answer sessions? Or TurboTax has the ability to allow me enter one 1099-R number at a time, and come up with the correct taxable amount in the end?

    #5093
    Alan S.
    Participant

    You should enter each one separately.

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