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Conversion of Traditional Nondeductble IRA Contribution to Roth IRA

In early 2012, I wanted to contribute $5,000 to a Roth IRA for 2011, but my income was too high, so I made the contribution to a Traditional, non-deductible IRA, then the next day, converted it to a Roth IRA. I then filed Form 8606 with my 2011 return. I also intend to complete Form 8606 for my 2012 return to show the conversion in 2012.

I just received Form 1099-R, which shows I took a distribution of $5,000 in Boxes 1 and 2, and shows code 2 in Box 7, which I see means, "Early distribution, exception applies (under age 59 1/2)". One copy of the form states to report this income on my Federal Tax return. What income? Another copy instructs to file it with my state return, when required.

Is this all correct? I didn't take a distribution, I converted from non-deductible Traditional to Roth with no gain or loss.

Reply to
Dimitrios Paskoudniakis
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Every time you take a distribution from a traditional IRA, the IRA custodian takes the position hat they do not know if you used pre-tax funds or after-tax funds, so they assume it is taxable, and the check the box labeled Taxable amount cannot be determined.

You notify IRS it is not taxable, assuming you have no traditional IRA with pretax amounts, by listing the nondeductable contribution on Form 8606. You also enter the entire gross distribution on form

1040 line 15a and if none of the distribution is taxable, do not enter it on line 15b.
Reply to
Arthur Kamlet

You should have completed Part I and Part II of the 8606. Part II is where the taxable amount of the distribution is computed. If the IRA in question was your only IRA account and/or you only had IRA accounts where the cost basis was equal to the balance, then the taxable amount will compute to zero.

Reply to
Alan

I filled out Form 8606 Part I in 2011, and will fill out Parts I and II in

2012 showing no taxable amount. I had no prior deductible IRA funds, all Roth. I will show on Form 1040 Line 15a a distribution of $5000, and Line 15b a taxable amount of zero.
Reply to
Dimitrios Paskoudniakis

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