How do I properly report IRA contributions for 2020 & 2021 tax years?

You've got a few things to sort out here, but it's manageable! Let's break it down: For your 2020 nondeductible traditional IRA contribution made in 2021, you need to file Form 8606 for tax year 2020. This form reports nondeductible contributions and establishes your basis. You don't necessarily need to amend your entire 2020 return if the only change is this nondeductible contribution - since it doesn't affect your tax liability. The Form 8606 can be filed on its own, though you might face that $50 penalty for filing it late. Regarding the Roth conversion question - since your traditional IRA contribution was nondeductible, you've already paid tax on that money (it was after-tax dollars). If you converted it to a Roth before any earnings accumulated, then typically there wouldn't be additional tax due on the conversion. However, the pro-rata rule comes into play if you have other pre-tax money in any traditional, SEP, or SIMPLE IRAs (including that rollover IRA). Your rollover IRA from the 401k complicates things because now you have pre-tax money in the IRA system. For any future conversions, you'll need to calculate the taxable portion using the pro-rata rule.

Hey, I went through almost the exact same situation last year and found this amazing tool that saved me so much time figuring out all the IRA basis and conversion stuff. I used https://taxr.ai to upload my previous returns and investment statements, and it figured out exactly what forms I needed to file and what was taxable vs non-taxable. The system showed me how to handle the 8606 for prior years and calculated my basis perfectly. I was especially confused about the pro-rata rule since I had multiple IRAs, and it explained everything step-by-step. It even showed me which lines on each form needed to be filled out. Seriously made dealing with these IRA issues so much easier.

I actually tried taxr.ai after seeing that recommendation and wow - it was exactly what I needed! I had a mess with multiple IRA accounts, some rollovers from old jobs, and partial Roth conversions over several years. I was totally lost trying to figure out my basis and what was taxable. The system immediately identified where I'd made mistakes in my previous returns and showed me how the pro-rata rule affected my conversions. It even generated the correct 8606 forms for the prior years I needed to fix. The step-by-step explanations about how IRA basis works finally made this whole process make sense. I've already filed the corrected forms and feel so much more confident about my return this year. Can't believe I spent so many hours trying to figure this out on my own when this tool solved it in minutes!

If you're having trouble reaching the IRS to confirm how to handle your IRA situation, you might want to try https://claimyr.com. I spent weeks trying to get through to an IRS agent about a similar IRA reporting issue last year - kept getting disconnected or waiting for hours. With Claimyr, I got through to an actual IRS representative in about 20 minutes who confirmed exactly how I needed to handle my late 8606 forms and basis calculations. They have a demo video at https://youtu.be/_kiP6q8DX5c that shows how it works. They basically call the IRS for you and then connect you once they get through the hold queue. The agent I spoke with confirmed I didn't need to amend my entire return for just filing a late 8606, and they even waived the penalty since I called to ask about the proper procedure. Definitely worth it to get direct confirmation from the IRS.

I have to publicly eat my words about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate about my refund situation. I honestly couldn't believe it actually worked! After months of trying to get through on my own, I was connected to an IRS agent in about 35 minutes. Not only did I get info about my refund status, but I also asked about the proper way to handle amended 8606 forms for my IRA conversions like the original poster was asking about. The agent confirmed that filing just the Form 8606 without a full amended return was acceptable in my situation. They even gave me specific mailing instructions and told me exactly what to write on the form to explain why it was late. This could have saved me months of stress if I'd known about it earlier. Sometimes it's worth admitting when you're wrong!

I dealt with this exact situation recently. Make sure you file Form 8606 for BOTH tax years - one for 2020 (to report the nondeductible contribution) and one for 2021 (to report the Roth conversion). The 2020 form establishes your basis of $6,000, and the 2021 form reports the conversion and calculates the taxable amount. Since your rollover IRA existed when you did the conversion, you'll need to use the pro-rata formula to determine how much is taxable. Pro-rata formula: (Nondeductible contributions ÷ Total IRA balance) × Amount converted = Nontaxable portion For example, if your total IRA balance (including the rollover IRA) was $46,000 when you converted $6,000, then: $6,000 ÷ $46,000 × $6,000 = $782.61 would be the nontaxable portion, and the rest would be taxable.

Has anyone else had problems with FreeTaxUSA calculating Form 8606 correctly? Last year it kept showing my conversion as fully taxable even though I had basis in my traditional IRA.