The previous post Split-Year Backdoor Roth IRA in FreeTaxUSA, 1st Year dealt with contributing to a Traditional IRA for the previous year and recharacterizing a previous year’s Roth IRA contribution as a Traditional IRA contribution. This post handles the conversion part in FreeTaxUSA. We cover two example scenarios in this post. Here’s the first: You contributed $6,000 to a Traditional IRA for 2022 in 2023. The value increased to $6,200 when you converted it to Roth in 2023. You received a 1099-R form listing this $6,200 Roth conversion. You should’ve already reported the con ..read more

The best way to do a backdoor Roth is to do it “clean” by contributing *for* and converting in the same year — contribute for 2023 in 2023 and convert in 2023, contribute for 2024 in 2024 and convert in 2024, and contribute for 2025 in 2025 and convert in 2025. Don’t split them into two years such as contributing for 2022 in 2023 and converting in 2023 or contributing for 2023 in 2024 and converting in 2024. If you did a “clean” backdoor Roth and you’re using FreeTaxUSA, please follow How to Report Backdoor Roth In FreeTaxUSA (Updated). However, many people didn’t know they shou ..read more

You may have contributed to a Roth IRA and then realized later in the year that you would exceed the income limit. You recharacterized the Roth IRA contribution as a Traditional IRA contribution and converted it to Roth again before the end of the year. Your IRA custodian sent you two 1099-R forms, one for the recharacterization and one for the conversion. This post shows you how to put them into the H&R Block tax software. If you had done the recharacterizing and converting in the following year, you would have to split the tax reporting into two years by following Split-Year Backdoo ..read more

The previous post Split-Year Backdoor Roth in H&R Block, 1st Year dealt with contributing to a Traditional IRA for the previous year and recharacterizing a previous year’s Roth IRA contribution as a Traditional IRA contribution. This post handles the conversion part. We cover two example scenarios. Here’s the first: You contributed $6,000 to a Traditional IRA for 2022 in 2023. The value increased to $6,200 when you converted it to Roth in 2023. You received a 1099-R form listing this $6,200 Roth conversion. You should’ve already reported the contribution part on your 2022 ..read more

The best way to do a backdoor Roth is to do it “clean” by contributing for and converting in the same year — contribute for 2023 in 2023 and convert in 2023, contribute for 2024 in 2024 and convert in 2024, and contribute for 2025 in 2025 and convert in 2025. Don’t split them into two years such as contributing for 2022 in 2023 and converting in 2023 or contributing for 2023 in 2024 and converting in 2024. If you did a “clean” backdoor Roth and you’re using H&R Block tax software, please follow How to Report Backdoor Roth in H&R Block Tax Software. However, many people didn’t know they ..read more

Selling a short box spread is a way to get a loan at a good rate using your investments as collateral. I sold some short box spreads to get cash for building a home because I didn’t want to sell stocks when stocks were down. Now that stocks recovered, I sold stocks to close out the box spreads before the expiration date. When you close out a box spread early, you may end up with a gain or loss depending on the interest rate changes. The interest rate happened to have gone up since I originally sold the short box spreads. I ended up with a small gain. The broker will include the realized gain o ..read more

You may have contributed to a Roth IRA and then realized later in the year that you would exceed the income limit. You recharacterized the Roth IRA contribution as a Traditional IRA contribution and converted it to Roth again before the end of the year. Your IRA custodian sent you two 1099-R forms, one for the recharacterization and one for the conversion. This post shows you how to put them into TurboTax. If you had done the recharacterizing and converting in the following year, you would have to split the tax reporting into two years by following Backdoor Roth in TurboTax: Recharacterize &am ..read more

17th-century French mathematician and philosopher Blaise Pascal put forward this reasoning on whether one should believe in God (paraphrasing): You’re not sure whether God exists. If you believe in God and God doesn’t exist, you live with some unnecessary inconvenience. If you don’t believe in God and God does exist, you receive infinite suffering. The cost of being wrong is much higher in the latter case. Therefore you should believe in God whether God exists or not. This is called Pascal’s wager. It’s a strategy to minimize loss when you’re not sure. We face many laws and rules in handling o ..read more

The previous post Backdoor Roth in TurboTax: Recharacterize and Convert, 1st Year dealt with contributing to a Traditional IRA for the previous year and recharacterizing a previous year’s Roth IRA contribution as a Traditional IRA contribution. This post handles the conversion part. Here’s the first example scenario: You contributed $6,500 to a Traditional IRA for 2022 in 2023. The value increased to $6,700 when you converted it to Roth in 2023. You already reported the contribution part on your 2022 tax return. The IRA custodian sent you a 1099-R form for the conversion in 2023. This post s ..read more

The best way to do a backdoor Roth is to do it “clean” by contributing *for* and converting in the same year — contribute for 2023 in 2023 and convert in 2023, contribute for 2024 in 2024 and convert in 2024, and contribute for 2025 in 2025 and convert in 2025. Don’t split them into two years such as contributing for 2022 in 2023 and converting in 2023 or contributing for 2023 in 2024 and converting in 2024. If you did a “clean” backdoor Roth, please follow How To Report Backdoor Roth In TurboTax (Updated). However, many people didn’t know they should’ve done it “clean.” Some people thought it ..read more