Very confused about reporting IRA->Roth transactions on Income Tax

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Subject Author Date Very confused about reporting IRA->Roth transactions on Income Tax Gary 02-04-2009  Re: Very confused about reporting IRA->Roth transa... removeps-groups@yahoo.com 02-11-2009  Re: Very confused about reporting IRA->Roth transa... Mark Bole 02-13-2009  Re: Very confused about reporting IRA->Roth transa... Mark Bole 02-13-2009
Posted by Gary on February 4, 2009, 1:57 pm Please log in for more thread options In 2008, I had the following transactions (all with Fidelity): Convert IRA to Roth...........................100,000 Return of excess contributions...............5,000 Recharacterized Roth back to IRA.......50,000 I did the return of excess because I realized that I had forgotten to take my minimum required distribution before converting. I did the partial recharacterization because I realized I wouldn't have enough cash to pay the resulting income taxes. Because of losses, the amount Fidelity actually withdrew and returned to me was $4,500. Because of losses, the amount they actually transferred back into my IRA for the recharacterization was $45,000. I usually do my own income taxes, but I'm very confused about what to report how and where in filling out my income tax. Can someone out there give me a clue? Are there any tax consequences to the losses? Thanks in advance. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by removeps-groups@yahoo.com on February 11, 2009, 10:35 am Please log in for more thread options > In 2008, I had the following transactions (all with Fidelity): > > Convert IRA to Roth...........................100,000 > Return of excess contributions...............5,000 > Recharacterized Roth back to IRA.......50,000 > Because of losses, the amount they actually transferred back into my > IRA for the recharacterization was $45,000. > I usually do my own income taxes, but I'm very confused about what to > report how and where in filling out my income tax. Can someone out > there give me a clue? Are there any tax consequences to the losses? Use form 8606 to report conversions, recharacterizations, and non- deductible contributions. Do you do it yourself using a computer program or write into the forms directly? The loss is deductible only if close out all of your traditional IRAs, and the loss is only allowed on your non-deductible contributions, and the loss is subject to the 2% of AGI rule (only the loss over 2% of your AGI is deductible), and the loss is not allowed under AMT (ie. so it may increase your AMT tax). See http://asktheexpert.blogs.money.cnn.com/2008/10/30/deducting-your-ira-losses/ for an explanation. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Mark Bole on February 13, 2009, 11:56 am Please log in for more thread options removeps-groups@yahoo.com wrote: > >> In 2008, I had the following transactions (all with Fidelity): >> >> Convert IRA to Roth...........................100,000 >> Return of excess contributions...............5,000 >> Recharacterized Roth back to IRA.......50,000 > >> Because of losses, the amount they actually transferred back into my >> IRA for the recharacterization was $45,000. But the conversion amount recharacterized should still be $100K under most circumstances (did you have other contributions or distributions during the calculation period from conversion date to recharacterization date?) >> I usually do my own income taxes, but I'm very confused about what to >> report how and where in filling out my income tax. Can someone out >> there give me a clue? Are there any tax consequences to the losses? You could do more research, or hire a professional. It's not likely that your 1099-R forms alone will resolve everything, a statement to the IRS with your return will most likely be required. > Use form 8606 to report conversions, recharacterizations, and non- > deductible contributions. Do you do it yourself using a computer > program or write into the forms directly? The loss is deductible only > if close out all of your traditional IRAs, and the loss is only > allowed on your non-deductible contributions, and the loss is subject > to the 2% of AGI rule (only the loss over 2% of your AGI is > deductible), and the loss is not allowed under AMT (ie. so it may > increase your AMT tax). See http://asktheexpert.blogs.money.cnn.com/2008/10/30/deducting-your-ira-losses/ > for an explanation. > You should re-read the article you posted. It's not common to have a basis in a Trad. IRA, so what loss are you talking about? -Mark Bole -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Mark Bole on February 13, 2009, 2:22 pm Please log in for more thread options Mark Bole wrote: >> Use form 8606 to report conversions, recharacterizations, and non- >> deductible contributions. Do you do it yourself using a computer >> program or write into the forms directly? The loss is deductible only >> if close out all of your traditional IRAs, and the loss is only >> allowed on your non-deductible contributions, and the loss is subject >> to the 2% of AGI rule (only the loss over 2% of your AGI is >> deductible), and the loss is not allowed under AMT (ie. so it may >> increase your AMT tax). See >> http://asktheexpert.blogs.money.cnn.com/2008/10/30/deducting-your-ira-losses/ >> >> for an explanation. >> > > You should re-read the article you posted. It's not common to have a > basis in a Trad. IRA, so what loss are you talking about? Sorry, upon re-reading I see your statement above is accurate, but I don't think it applies at all to the OP's situation. He apparently doesn't have, and isn't concerned about, a deductible loss. What he is trying to accomplish with the recharacterization, is to not pay tax in the first place on conversion income that has since evaporated. -Mark Bole -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted S-Corp income reporting December 8, 2006, 2:26 am Not reporting rental income July 28, 2007, 2:28 am Reporting income from NQSO without a W-2 April 8, 2008, 9:57 pm Reporting Income from Unusual Job Situations February 14, 2008, 11:04 am self employment income reporting error ... help please! 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