Does this pro-rata rule apply even if the other traditional IRA is with a different company? Like if my backdoor Roth is with Vanguard but I have an old IRA at Fidelity?

Yes, the pro-rata rule applies regardless of where your IRA accounts are held. The IRS doesn't care if they're at different institutions - they look at the total of all your traditional, SEP, and SIMPLE IRAs combined when calculating how much of a conversion is taxable. It's one of the most common mistakes people make with backdoor Roth conversions. The only way around it is to either convert all your pre-tax IRA money (and pay the taxes), or if you have a 401k that allows it, roll your pre-tax IRA funds into the 401k before doing the backdoor Roth process.

I used TurboTax last year for my backdoor Roth and it worked fine, but you have to be careful about how you enter everything. Make sure you indicate that your Traditional IRA contribution was non-deductible. There's a specific section for Form 8606 in TurboTax where you'll report both the contribution and conversion.

Thanks for sharing your experience! I'll look for that Form 8606 section specifically. Did you find that TurboTax explained the process well, or did you need to already understand what you were doing?

7 Does the Wage and Income Transcript show state tax withholding too? Or just the federal stuff? I'm worried about both returns.

11 The Wage and Income Transcript only shows federal information, not state withholding. That's an important limitation to be aware of. For state withholding information, you'll need to contact your state tax agency directly to see if they offer a similar transcript service. Some states do have their own wage reporting systems, but it varies widely. You might need to use your federal transcript plus your bank records to make a reasonable estimate for your state withholding if you can't get the actual W-2.

1 I hadn't thought about contacting the payroll company directly! That's a great idea. I think they use some service called Payday or something similar... I'll have to ask my coworker. Would I need specific login information or can they look me up by SSN?

Quick question - I have a 1099-R with code "7" in Box 7. What does that mean? The state is saying I owe taxes but I thought I qualified for an exception.

Code "7" indicates a normal distribution, which is generally fully taxable at both federal and state levels. Unlike code "G" (which indicates a rollover), code "7" distributions don't qualify for tax-free treatment. If you believed you qualified for an exception, you may be thinking of a specific situation like being over 59½ (which exempts you from the early withdrawal penalty but not the income tax), or possibly a qualified disaster distribution. These would still be taxable income even if the 10% penalty was waived.

I successfully disputed a similar situation. The key was getting a corrected 1099-R from the financial institution. In your mom's case, she needs to track down that old employer's 401k administrator - usually a company like Fidelity, Vanguard, etc. Even if the employer is gone, the administrator should still exist. What likely happened is either an administrative change in the plan or they may have forced a distribution if the account was small and inactive for many years (some plans automatically distribute accounts under $5,000 if you're no longer an employee). If she never received the money, they might have sent it to the state as unclaimed property!

Thanks for breaking it down so clearly. For the investment portion - do short-term and long-term capital gains both count as "investment income" for this purpose? Also, if my investment income is less than the allocated interest, can I really carry forward the excess to future years?

Yes, both short-term and long-term capital gains count as investment income for the purpose of deducting investment interest. This includes all the investment income reported on your Schedule B, D, and similar forms. The carryforward provision is one of the most valuable aspects of investment interest expense. If your investment interest expense exceeds your net investment income in the current year, you can definitely carry forward the unused portion indefinitely to future tax years. You'll use Part II of Form 4952 to track this carryforward. Many investors actually plan around this, knowing they can use the deduction in future years when they have larger capital gains or other investment income.

That's not quite how it works. The "payment allocation" rules let you choose which loan you're paying when you have multiple loans, but they don't let you magically convert non-deductible interest to deductible. The IRS traces interest based on the USE of the money, not which part of the loan you claim to be paying off first.

Thanks for clarifying! I must have misunderstood what my accountant was saying. So there's really no way to optimize the allocation to increase the deductible portion? Sounds like I'm stuck with the original percentages based on how I used the funds.

Thank you! I'm here on an H1B, not a student visa. I did look up the treaty and confirmed it's Article 10 that applies to my situation with the 25% rate. Do you know if I need to attach any specific form to my 1040NR to document this treaty claim? Or do I just report the income with the 25% rate applied?

Since you're on an H1B and this is a standard treaty provision for the reduced dividend withholding rate, you typically don't need to attach Form 8833. You'll report the dividend income on your 1040NR and apply the treaty rate directly. In Sprintax, when you enter your dividend income, there should be an option to indicate that it's subject to a treaty rate. Make sure you select "India" as your country of residence for treaty purposes and the system should apply the correct 25% rate. For the period where no withholding was done, you'll need to calculate and pay the 25% tax on those dividends.

Not necessarily. If OP was mistakenly treated as a US person for part of the year, Fidelity might have issued a 1099-DIV instead of a 1042-S for those months with no withholding. They should check both documents.