Keeping Track of Your Roth Conversion: Key Tax Forms

How to Complete IRS Form 8606 (for a Backdoor Roth IRA; YouTube link)

There are two key tax reports you'll want to receive for a Roth conversion:

1. Form 1099-R from your custodian (the financial institution holding your traditional IRA):

   • This form reports the total distribution amount from your traditional IRA.
   • In the case of a Roth conversion, the distribution amount will represent the fair market value of your entire traditional IRA account (including contributions and earnings) on the conversion date.
   • Box 7 of the 1099-R will likely have a code indicating a rollover or conversion (typically code "R").

2. Form 8606 (titled "Nondeductible IRAs"):

   • This form, filed with your tax return, tells the IRS how much of your Roth conversion was from non-deductible contributions you previously made to your traditional IRA.
   • It's important to report this correctly, as only the portion converted from earnings in your traditional IRA is taxable. This form helps determine the taxable amount of the conversion.

Here's a breakdown of their roles:

• Form 1099-R: Provides the total distribution from your traditional IRA, which is the basis for the conversion.
• Form 8606: Clarifies how much of the conversion represents non-deductible contributions (not taxable) vs earnings (taxable).

It's important to note:

• You will typically receive these forms from your custodian by mail in January or February of the following year.
• You can usually also access them electronically through your custodian's online portal.

If you have a complex situation or questions about how to fill out Form 8606, consulting with a tax professional is recommended.

Acknowledgement

• The above content was generated by Gemini.