I am going to use the Backdoor Roth IRA strategy for the first time. I've created Traditional IRA to Roth IRA accounts at Fidelity to do that. I will be funding $6k from my Chase bank checking account which is already after-tax money. I will first deposit that money from my Chase bank account to Traditional IRA account. In the next step, I will quickly do the conversion of that money from Traditional IRA to Roth IRA. The Fidelity associate told me that while doing that conversion, I will be asked whether I want to deduct the tax at the time of conversion itself or do I want to take care of the tax later. My question is, why do I need to pay tax again? Because that $6k which I am depositing into Traditional IRA account is already after-tax money. Also, he mentioned that I will get Form 1099R and Form 5498 from Fidelity. He also mentioned that while filing tax return, I should file Form 8606 with IRS to declare that I had a nondeductible contributions to traditional IRA and I did a conversion from traditional IRA to Roth IRA. People who have experience with all these, can you all please help me with my above questions? Thank you. TC: 240 #personalfinance #tax #investments #incometax #ira
https://www.thepainvestor.com/2020/06/15/the-backdoor-roth-tutorial-with-fidelity/?utm_source=rss&utm_medium=rss&utm_campaign=the-backdoor-roth-tutorial-with-fidelity The above link should have everything you need along with including form 8606 at your year end tax submission . Should be exactly the same as listed . Been doing the same since last 3 years
Thank you.
Iāve been doing Backdoor Roth at Fidelity the last few years. It is confusing, but I select the take care of tax later option.
Do you know if Amazon allows this ? I mean after our 20k contributions to 401k, can we do a 6k$ contribution to IRA to Roth IRA ?
Yes. It has nothing to do with Amazon. Contribution limits to IRAs are separate from limits to employer 401ks. So yes, you can max out your 401k, and separately max your IRA.
Hey I have some money in my Rollover IRA account from my previous employer. In Fidelity I am seeing option to contribute $6k to IRA. Can you transfer my money from Rollover IRA account?
You won't have to pay tax again, I think the Fidelity rep is confused and thinks you'll have pre-tax money in your traditional IRA. I can't remember the specific forms, but there are guides if you Google stuff like "how to report backdoor Roth in TurboTax"
Thanks.
np!