Backdoor roth tax

[jobofferae]

I contributed post tax funds to a traditional IRA and converted to a roth, doing a backdoor roth.

My tax guy is insisting that the withdrawal from the traditional ira is a distribution and is subject to tax.

I have tried to explain to him that a conversion is not a distribution, sent him articles, but he is insisting that it should be taxed.

Any tips for getting through to him? He is refusing to override his software and insisting he is right.

(We have an extension at this point.)

[flygirl]

Did you do the contributions over time or in a lump sum and then wanted to convert it?

[jobofferae]

Lump sum

[mae0111]

Did you convert same day? If not, I believe that the gains are taxable.

[dragon's breath]

Do you have any other tIRA funds? If you have any pre-tax/tax-deducted funds in a tIRA then you have to deal with the pro-rata rule, and a portion of the converted funds would be taxable. It does not matter if the funds were in a different tIRA account than the post-tax funds.

If there were no other tIRA funds on 12/31/22, and you only converted the already-taxed amount, then no pro-rata rule, and only any gains made before the conversion would be taxable (if held in cash, and converted within a few days, gains usually round out to zero.)

It's not a distribution either way though. I'd be concerned this "tax guy" doesn't know what he's doing and worried about what else he is messing up.

[jobofferae]

Converted same day or maybe next day.
No other IRA funds

I know this should not be taxed
I am looking for a way to get through to the tax guy

And absolutely I will NOT be using him again ever

[archiethedragon]

Apr 19, 2023 12:09:46 GMT -5 jobofferae said:

I am looking for a way to get through to the tax guy

"If you file our return and include this income as taxable I will sue the shit out of you.   File it the way I am telling you to."

[jobofferae]

Apr 19, 2023 12:40:28 GMT -5 archiethedragon said:

Apr 19, 2023 12:09:46 GMT -5 jobofferae said:

I am looking for a way to get through to the tax guy

"If you file our return and include this income as taxable I will sue the shit out of you.   File it the way I am telling you to."

He is refusing to file the way we want because it will make him liable for malpractice and "get him into trouble with the IRS".
He's telling us if we don't like it, to basically file ourselves, but we still have to pay him for his time.

[puppyluv]

If you contributed post tax fund to a traditional IRA and then rolled it over the tax burden should be a wash. You should have a deduction to your taxes for the traditional IRA deposit and then pay the same amount in marginal tax on the roll over. Any funds going from a traditional to a Roth should be subject to your tax rate but its not a withdraw where there would be a tax penalty.

[kadams767]

Tell him to look at and actually read the instructions for Form 8606 and the form itself. It is very self-explanatory.

To be clear, the amount from the T-IRA will be coded as a taxable distribution when you get the 1099-R form.  That’s probably all he knows about it, though.  You will get that 1099-R, plus a 5498 for the Roth IRA that shows the corresponding conversion amount.

[jobofferae]

Apr 19, 2023 19:56:23 GMT -5 kadams767 said:

Tell him to look at and actually read the instructions for Form 8606 and the form itself. It is very self-explanatory.

To be clear, the amount from the T-IRA will be coded as a taxable distribution when you get the 1099-R form.  That’s probably all he knows about it, though.  You will get that 1099-R, plus a 5498 for the Roth IRA that shows the corresponding conversion amount.

This is helpful, thank you. What specifically in the 5498 should I direct him to in order to make it clear that he should NOT be coding it as a taxable distribution (as shown in 1099-R)?

[kadams767]

Apr 19, 2023 20:25:21 GMT -5 jobofferae said:

Apr 19, 2023 19:56:23 GMT -5 kadams767 said:

Tell him to look at and actually read the instructions for Form 8606 and the form itself. It is very self-explanatory.

To be clear, the amount from the T-IRA will be coded as a taxable distribution when you get the 1099-R form.  That’s probably all he knows about it, though.  You will get that 1099-R, plus a 5498 for the Roth IRA that shows the corresponding conversion amount.

This is helpful, thank you. What specifically in the 5498 should I direct him to in order to make it clear that he should NOT be coding it as a taxable distribution (as shown in 1099-R)?

Not sure what company your accounts are held with, but mine are at Fidelity and Line 3 literally is “Roth IRA Conversion amount” and shows the amount I converted last year.  It then corresponds to the amount of the distribution shown on my T-IRA’s 1099-R (lines 1 and 2).  This is what he should be using to populate Form 8606 on your return.

[shaynaatl]

Is this a local CPA? Or an H&R Block type place? I would just keep sending them articles. I really like the Backdoor Roth explanation page from White Coat Investor. It tells you exactly what to put on the tax form.

www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/

I will say we have used 3 different preparers over the years (2 with H&R Block, and now a local CPA). None of them got the Backdoor 8606 form correct. I always have to go back to them and have them fix it. One of the H&R Block guys even tried to convince me that Congress had banned the Backdoor Roth the year before.