Is my Form 8606 correct for backdoor Roth IRA conversion when Traditional IRA distribution exceeded max due to interest?
I just did my first backdoor Roth IRA conversion this year and I'm confused about how to report it properly on Form 8606. I contributed the max $7,000 to a Traditional IRA at Fidelity, waited about a week, then converted "everything" to my existing Roth IRA. The problem is that during that waiting period, my Traditional IRA earned $2.35 in interest. So when I did the conversion, I actually moved $7,002.35 instead of just the $7,000 I initially contributed. I just got my 1099-R from Fidelity and it shows a gross distribution of $7,002.35 with "Taxable amount not determined" checked. When I look at my 2024 contribution summary on Fidelity's website, it confirms I contributed $7,000 to the Traditional IRA, distributed $7,002.35 from the Traditional IRA, and made a rollover contribution of $7,002.35 to my Roth IRA. I'm really confused about how to fill out Form 8606 now. Which lines should show $7,000? Which lines should show $7,002.35? Do I round up to $7,002? And where exactly do I report the $2.35 that I need to pay tax on? Is it rounded up to $3? I don't have any other retirement accounts - no other Traditional IRAs, no 401k, no SEP, no SIMPLE IRA, nothing else. This was my first backdoor Roth but I've had my Roth IRA account for years.
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Diego Mendoza
The good news is that you're overthinking this a bit! Here's how to handle your Form 8606 for a backdoor Roth with some earnings: For Form 8606, you'll enter $7,000 on line 1 (your nondeductible contribution). The $2.35 in earnings doesn't change that amount - it's simply earnings on your contribution. When you get to line 8, you'll enter $7,002.35 (the total amount distributed). Line 9 will be zero if you have no other traditional IRAs with pre-tax money. Line 10 will be zero. Line 11 will be zero. Line 12 will be $7,000 (your basis). Line 13 will be $2.35 - this is your taxable amount. Line 14 will be zero. Line 15a will be $7,002.35 (total conversion). Line 15b will be $7,000 (nontaxable portion). Line 15c will be $2.35 (taxable portion). The $2.35 is the only part you'll pay tax on, and you'll report that on your 1040. Don't worry about rounding - use the exact amounts. The IRS systems can handle the pennies!
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Chloe Harris
•Thank you so much! One question though - if I don't round at all, do I just put $2.35 on line 13 and 15c? And does this $2.35 just get added to my regular income for tax purposes? Do I need to do anything special with it on my 1040?
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Diego Mendoza
•Yes, you'll put the exact amount of $2.35 on lines 13 and 15c without rounding. This amount will flow to your 1040 as ordinary income. When you're using tax software, it should automatically add this amount to your income when you enter the Form 8606 information. You don't need to do anything special with it - it's simply treated as taxable income, just like wages or interest income.
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Anastasia Popova
Hey there! I was in almost the exact same situation last year and was totally confused about how to handle it. I ended up spending hours trying to figure it out until I found this incredible tool called taxr.ai (https://taxr.ai) that helped me figure out exactly how to handle the Form 8606 for my backdoor Roth. I uploaded my 1099-R and it instantly identified that I had a backdoor Roth with a small amount of earnings. It walked me through exactly which numbers to put on which lines and explained why the earnings were taxable but the rest wasn't. It was honestly a lifesaver because even my friends who are pretty tax-savvy kept giving me conflicting advice. The tool also explained how this would affect my overall tax situation and confirmed I was doing everything correctly. Definitely worth checking out if you're confused about this form or any other tax documents!
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Sean Flanagan
•Did it also help with reporting the conversion on your 1040? I'm in a similar situation and my tax software (TurboTax) seems to be double-counting my conversion amount on my return.
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Zara Shah
•How accurate is this for state tax returns too? My state (CA) sometimes treats retirement distributions differently than the federal government does.
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Anastasia Popova
•It absolutely helped with the 1040 reporting! The tool identified exactly where the conversion should appear on the 1040 and explained that only the earnings portion ($2.35 in this case) would be added to taxable income. It also flagged that common mistake in TurboTax where people accidentally report the conversion twice - once from the 1099-R and once on Form 8606. It showed me how to avoid that error. Regarding state taxes, it handles state-specific differences really well. For California specifically, it noted that CA follows the federal treatment for Roth conversions in most cases, but highlighted a few CA-specific nuances. It actually saved me from making a mistake on my state return by pointing out how my state handled the basis differently than the IRS.
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Zara Shah
Just wanted to follow up about my experience with taxr.ai that someone recommended here. I was skeptical at first because I've tried other tax tools before, but this one actually understood my backdoor Roth situation perfectly. I had almost the exact same issue - contributed $7,000 and ended up with $7,003.12 due to interest before conversion. The tool immediately recognized what I was trying to do and gave me step-by-step instructions for Form 8606. It even explained which lines needed the original contribution amount and which needed the full distributed amount. What I found most helpful was that it explained WHY each number goes where it does - not just telling me what to fill out. That actually helped me understand the whole backdoor Roth process better. I've been doing my own taxes for years but never fully understood how Form 8606 worked until now.
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NebulaNomad
If you're having trouble with your Form 8606 and getting frustrated with the IRS website (which is useless for these specific questions), I highly recommend using Claimyr (https://claimyr.com) to actually speak with an IRS representative. I watched their demo video (https://youtu.be/_kiP6q8DX5c) and was pretty impressed with how it works. I was in a similar situation with my backdoor Roth and had questions about reporting the earnings. Tried calling the IRS myself and waited for almost 2 hours before giving up. Used Claimyr and got through to a real IRS agent in about 15 minutes who confirmed exactly how to handle the additional earnings on the conversion. The agent walked me through the Form 8606 line by line and confirmed that the small amount of earnings gets reported as taxable income. Saved me hours of frustration and gave me peace of mind knowing I was doing it correctly.
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Luca Ferrari
•How does this even work? The IRS phone system is an absolute nightmare. I've tried calling multiple times and either get disconnected or told to call back another time.
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Nia Wilson
•Sounds like a scam to me. How can a third-party service magically get you through to the IRS when their phone lines are completely jammed? And I'm sure they charge for this "service" too.
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NebulaNomad
•It works by essentially handling the waiting for you. Their system navigates the IRS phone menus and waits in the queue on your behalf. When an agent finally answers, you get a call back connecting you directly to that IRS agent. No magic involved - they're just automating the painful waiting process. As for whether it's legitimate, I was skeptical too, but it's completely above board. You're still talking directly to an official IRS representative - Claimyr just handles the waiting part. And yes, there is a fee, but it was absolutely worth it to me versus wasting hours of my day on hold. I needed official confirmation about my Form 8606 situation and got exactly what I needed.
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Nia Wilson
Well, I need to eat my words. After complaining about Claimyr sounding like a scam, I was desperate enough to try it when I couldn't get through to the IRS about my backdoor Roth conversion issues. I'm honestly shocked at how well it worked. I spent 3 days trying to reach the IRS myself with no luck. Used Claimyr yesterday and was speaking with an actual IRS representative in about 25 minutes. The agent confirmed exactly how to handle the interest earned in my Traditional IRA before conversion (which was my exact situation like the original poster). The IRS rep confirmed that I only needed to pay tax on the earnings portion and walked me through exactly which lines to fill out on Form 8606. Turns out I was overthinking it just like everyone else in this thread. I hate admitting when I'm wrong, but this service actually delivered exactly what it promised. Saved me a ton of stress and probably prevented me from making a mistake on my return.
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Mateo Martinez
Just a quick tip from someone who's been doing backdoor Roth conversions for years - if you want to avoid this issue entirely, just convert your Traditional IRA contribution to Roth on the SAME DAY you make the contribution. That way there's no time for any interest to accrue and you don't have to deal with the extra calculations. Most brokerages (Vanguard, Fidelity, Schwab) will let you do this, and it makes your Form 8606 super simple since the contribution and conversion amounts match exactly.
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Aisha Hussain
•Does this really work? I thought you had to wait a certain amount of time between contribution and conversion for it to be considered a legitimate backdoor Roth. Something about the "step transaction doctrine"?
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Mateo Martinez
•That's actually a common misconception. There's no required waiting period between making a Traditional IRA contribution and converting it to a Roth IRA. The "step transaction doctrine" was a concern years ago, but it's become a non-issue in practice. The IRS has had plenty of opportunity to challenge backdoor Roth conversions over the years (which are essentially a workaround for income limits) but they haven't done so. Congress has explicitly acknowledged the strategy without closing the "loophole," effectively blessing it. Many tax professionals now recommend doing the conversion immediately to avoid exactly the situation the original poster is dealing with - having to account for earnings during the waiting period.
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Ethan Clark
Make sure when you're doing the 8606 that you're consistent with your records from previous years! This tripped me up last year. If you've done backdoor Roth conversions before, line 2 of Form 8606 should include any "basis" carried over from previous years. If this is your first one, then line 2 would be $0 and line 3 would match line 1 ($7,000). Also, when you enter the 1099-R information in your tax software, some programs will try to tax the entire amount unless you specifically indicate it was a Roth conversion and direct it to Form 8606.
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Chloe Harris
•Thanks for this tip! This is my first backdoor Roth, so I guess my line 2 would be $0. I'm using TurboTax - do you know if there's a specific place where I need to indicate it's a Roth conversion to avoid being taxed on the full amount?
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