I checked and my 1099-R does have code 7 in Box 7. This is my first year doing a backdoor Roth so I don't have any previous basis - it was just a contribution and immediate conversion. I'm going to try completing the entire return and see if it fixes itself in the review stage like others suggested. If that doesn't work, I might just have to call their support line.

That's good that you have code 7 and no previous basis to worry about! Definitely try the complete-and-review approach. One last thing to check - make sure you're entering the contribution as a 2023 contribution (assuming that's when you made it) and not as a prior year contribution. Sometimes that distinction can trip up the software too. Let us know if it works out! These backdoor Roth issues are so common but so frustrating.

This is an excellent point! The pro-rata rule is the downfall of many backdoor Roth attempts. If you have ANY other money in ANY traditional IRA accounts (including SEP IRAs and SIMPLE IRAs), the backdoor strategy gets complicated fast.

Do you happen to know how long it typically takes for a credit card payment to show up in the IRS system? I need to make a payment ASAP but my electronic withdrawal is scheduled for next week.

In my experience, credit card payments typically take 3-5 business days to show up in the IRS system. However, the payment is considered made on the day you submit it, not when it appears in the IRS records - so you're protected from late payment penalties as long as you complete the transaction by the due date. If your electronic withdrawal is scheduled for next week, I'd recommend making your credit card payment immediately. Even if it doesn't show in the system before the withdrawal date, you can contact the IRS with your confirmation number if there's any issue with double payment. They can always refund overpayments, though it might take some time to process.

Good point about doing the math. Some premium travel cards give effectively 2-2.5% value for points when transferred to airline partners though, which can make it worthwhile even with the fees. I always use my Chase Sapphire Reserve for tax payments specifically because the points are worth more than the fees.

Thanks for mentioning the Form 8606! Would I need to file that for the tax year when I make the contribution to the Traditional IRA, or for the tax year when I do the conversion to Roth? If I contribute now but don't convert until next year, which tax year would it fall under?

You need to file Form 8606 for the tax year in which you make the non-deductible contribution to your Traditional IRA. This establishes your "basis" (after-tax money) in the IRA. If you contribute now (2023 tax year) but don't convert until next year (2024), you would still report the non-deductible contribution on Form 8606 with your 2023 tax return. Then when you do the conversion in 2024, you'd receive a 1099-R for that tax year, and you'd file another Form 8606 with your 2024 return to report the conversion. This is why keeping good records is so important - you need to track your basis over time, especially if you don't convert immediately after contributing.

I use Fidelity for my backdoor Roth and it's super easy. You can open both account types online in about 10 minutes, and their conversion process is just a few clicks. Never had to call customer service once. They also have good educational resources about the process right on their website.

This is interesting! Would you use Schedule D for this instead of reporting as hobby income? And do you need to keep receipts for everything to prove what you originally paid?

I do customize some of them! I repaint about 30% of the models I sell, and sometimes do minor repairs on vintage pieces. I just wasn't sure if that was enough to count as a "real business" since it's still mostly just for fun. But it sounds like that could help my case?

That definitely strengthens your case! The customization and repairs show you're adding value through your skills and labor, which is a big factor in the business vs. hobby determination. Make sure you document your work process - take before and after photos of your customizations, track the time you spend on each project, and keep receipts for all supplies. Also, consider creating a separate Instagram or Facebook page showcasing your work, even if it's just casual. Having a business presence online is another factor that supports business treatment. You might also want to look into selling at model horse shows or conventions if you don't already - participating in trade shows is another indicator the IRS looks for when determining if something is a business. The key is to show that you're making decisions with the intent to eventually be profitable, even if you're not there yet.

File early!!! Especially if you're expecting a refund. The sooner you file, the sooner you get your money back. Also, identity theft is a real problem - if someone gets your SSN they can file a fake return in your name and steal your refund. Filing early prevents this. Filing early also gives you more time to correct any mistakes if something goes wrong. Last year I waited till the last minute and realized I was missing a form, had to file an extension and it was a whole mess.

This is what I did! Our business school had accounting students doing this as part of their practical experience. They were super thorough and even found a credit I didn't know about. Definitely worth checking if your school offers this!

This is a great suggestion! I'll check with our business school to see if they offer this. Having someone walk me through it the first time would be really helpful. Thanks for the tip!