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[quote=Anonymous][quote=Anonymous]Last year we did a Roth conversion/back door Roth for the first time. Help me understand the tax implications, please.

We got a 1099 indicating the $6k we pulled from an IRA for the conversion is taxable. We wouldn’t have gotten the tax deduction for those IRA contributions anyway because spouse also has a 401k and we are above the income threshold for being allowed to take any deductions under those circumstances.

The $6k we put into the IRA is obviously from post-tax money. And now, we have to pay taxes again on the “withdrawal” from the IRA, even though it’s going right into a Roth. We don’t face any penalty or anything, but still seems unfair or not quite right.

Can those who have done this before please weigh in? Is this what you typically experience also?

I do understand that a back door Roth is already a benefit via a tax loophole. Is this just the price of that benefit?[/quote]

Technically, this is only a completely non-taxable event if you have no previously deducted IRA, rollover IRA or SEP IRA balances. If that is the case, then the $6K you put into the IRA (the non-deductible) portion is basis and that means your IRA was 100% basis. When you roll into a Roth, the "distribution" that is reported on Form 1099-R is not taxable.

If you have a rollover IRA, a SEP IRA or a traditional IRA from way back when, this backdoor Roth conversion doesn't work as advertised. Most of the amount reported on Form 1099-R will be taxable. [/quote]

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