Backdoor Roth

Snap
luftkuss

Go to company page Snap

luftkuss
Jan 10, 2021 34 Comments

I’m confused after talking to someone from fidelity. Are the 6k I transfer from a traditional IRA (which I opened for Backdoor Roth only and has no other funds) to an IRA Roth taxed again? If yes how much is it taxed? The 6k will be post tax money as I will initiating it from mu checking’s account. Fidelity representative told me that this conversion from trad Ira to Roth IRA triggers a tax event?

Thanks #personalfinance #investments

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TOP 34 Comments
  • Google / Eng
    aOzK12

    Go to company page Google Eng

    aOzK12
    Also pro tip: invest in REITs with your Roth IRA. Make use of the tax free growth (includes dividends)
    Jan 10, 2021 5
    • Google / Eng
      aOzK12

      Go to company page Google Eng

      aOzK12
      I’m not sure how relevant it is anymore but from reading The Intelligent Investor, historically, super high inflation caused people to spend less which brought down the earnings (and consequently the value) of companies. Some inflation is good but too much inflation is horrible for stocks but the right REITs should keep up since people can’t just choose to not pay rent. All this is new to me though so correct me if I’m wrong!
      Jan 10, 2021
    • Google / Eng
      Morono🦠

      Go to company page Google Eng

      Morono🦠
      Then you should be careful to pick REITs that hold majority of the assets in apartments, because CRE will underperform in the situation where the stock market is down during hyperinflation.

      Further still, it may not hold on the inflationary event where high percentage of population loses income and can't rent.
      Jan 10, 2021
  • Tesla
    xcmg85

    Go to company page Tesla

    xcmg85
    Fidelity will auto recognize the roth conversion, and you'll need to do the proper paperwork when it comes tax time:

    Fidelity will send you a 5498 that shows the contribution of 6K to the IRA, another 5498 for Roth contribution (ie transfer), and a 1099R for the 6K leaving the traditional account. When you file, you'll need to fill out an 8606 for the initial contribution.

    When you do this 8606, turbotax will ask you if this is part of a backdoor roth conversion. Click yes, and the software will balance everything out for you.
    Jan 11, 2021 6
    • Tesla
      xcmg85

      Go to company page Tesla

      xcmg85
      No you're fine. For IRS, the transfers are only tracked in whole dollars rounded up or rounded down. At 0.02c, it'll show up as an even 6k, and the 0.02c is a freebie for you. If it averaged up to 6001 though, then it would show up on the forms and you'd just have to pay tax on the $1. Don't sweat it.
      Jan 31, 2021
    • Snap
      🤷🏻‍♀️gme🚀

      Go to company page Snap

      🤷🏻‍♀️gme🚀
      Thank you!!! And tsla 🚀🚀🚀
      Jan 31, 2021
  • Airbnb
    PaymentSRE

    Go to company page Airbnb

    PaymentSRE
    The only taxes would be if you made gains in the short term your money is in the traditional Ira and not yet in Roth. You can avoid those by using a money market fund.
    Jan 10, 2021 3
  • Walmart
    Mr Red

    Go to company page Walmart

    Mr Red
    I think he obliged to tell you about tax event. I do the same thing, move money to traditional, next day convert to Roth.

    The online form asks if I want to withhold taxes I say no. Just make sure three things

    1. The money you convert was not used as a tax deduction
    2. Make sure you only have 1 traditional Ira. It’s ok to have multiple 401ks. But the moment you roll 401k down into that traditional Ira you are going to encounter difficulties doing backdoor on just 6000. The form is simple if you can zero out the account after conversion
    3. At tax time fidelity will report 6000 as income. So you need to get the correct forms/tax software to recognize this.
    Jan 10, 2021 3
    • Walmart
      Mr Red

      Go to company page Walmart

      Mr Red
      If you have an employer 401k you can’t take deduction for traditional anyway (consultant with professional to be sure). I never pay tax. Tax forms are available to make this a pass through. if it doesn’t make sense that’s because it’s a loop hole
      Jan 10, 2021
    • Oracle
      Vsjg1!

      Go to company page Oracle

      Vsjg1!
      I have an IRA that has mixed contributions over time. Hie can one determine that ratio(pretax/post tax) for pro rata?
      Jan 10, 2021
  • IBM
    xlajduf

    Go to company page IBM

    xlajduf
    Not taxes if its from your checking account.

    You can do this online. No need to call
    Jan 10, 2021 0