Should I amend my 2021 tax return? Confused about 1099-R and Form 8606 for backdoor Roth IRA

But what about the 1099-R? OP mentioned they received one but the spouse didn't. Doesn't that indicate something wasn't reported correctly? And wouldn't the spouse need to report the conversion on their 2022 return since that's when it happened?

The 1099-R timing is actually consistent with what happened. OP received a 1099-R for 2021 because their conversion happened in 2021. The spouse didn't receive a 1099-R for 2021 because their conversion happened in 2022 - they would have received a 1099-R for 2022 instead. Yes, the spouse would need to report their conversion on their 2022 return since that's when it happened. The Form 8606 for 2021 establishes the non-deductible basis, and then the 2022 Form 8606 reports the conversion. That's why both years need proper documentation, but it doesn't sound like an amended return is needed for 2021.

Thank you so much for the clear explanation! That makes a lot of sense. So to clarify - the 2021 Form 8606 was needed to establish the non-deductible contributions for both of us, and then my husband's conversion would be reported on the 2022 return with a 2022 Form 8606? I was worried we might have done something wrong when the CPA prepared our 2021 taxes. We did get Form 8606 for both of us in 2021, so it sounds like that was correct. And we made sure to report my husband's conversion on our 2022 return. Is there any way to double-check that everything was done correctly without going through the hassle of amending?

You've got it exactly right! The 2021 Form 8606 establishes the non-deductible contributions for both of you, and your husband's conversion would be reported on the 2022 return with another Form 8606. The easiest way to verify everything was done correctly is to request a tax transcript from the IRS for both 2021 and 2022. You can do this online through the IRS website, and it will show what forms were filed with your returns. Look for Form 8606 on both years' transcripts. If you filed your 2022 return correctly reporting your husband's conversion, and your 2021 return included Form 8606 for both of you (which it sounds like it did), then everything should be in order and no amendment is needed.

Does it actually work with complicated situations like backdoor Roth IRAs? I've tried tax software before that claims to handle these situations but then ends up confused when there's timing issues like OP is describing. How exactly does it analyze the forms?

I'm a bit skeptical about uploading my tax documents to some website I've never heard of. How secure is this service? And how does it compare to just asking a tax professional? Seems like with something as specific as backdoor Roth IRA timing issues, you might need actual personalized advice.

It's specifically designed for complicated situations like backdoor Roth IRAs, recharacterizations, and conversions. It analyzes the actual forms and numbers across multiple tax years to detect inconsistencies. In my case, it identified that I had reported the non-deductible contribution correctly on my 2021 Form 8606 but then entered the wrong basis amount on my 2022 Form 8606 when reporting the conversion. The security is bank-level with encryption and they don't store your documents long-term. You can actually delete everything after analysis. I found it more helpful than my previous tax professional who got confused about the timing issues. The analysis is personalized based on your actual tax documents and situations - it's not just generic advice.

How does this Claimyr thing actually work? I thought it was impossible to get through to the IRS without waiting for hours. Does it just keep dialing for you or something?

Right... a magical service that gets you through to the IRS when millions of people can't get through. Sounds too good to be true. And even if you do get through, what are the chances you'll get an agent who actually understands the nuances of backdoor Roth IRAs and Form 8606 reporting across multiple tax years? Most agents just give generic answers.

It basically holds your place in line and calls you when it gets through to an agent. Instead of you waiting on hold for hours, their system does the waiting and then connects you once an actual human at the IRS answers. I was skeptical too but it literally saved me hours of hold music. The key is asking for a tax law specialist when you do get through. You might need to be transferred, but there are definitely IRS agents who understand backdoor Roth IRAs. The agent I spoke with immediately knew what I was talking about when I mentioned Form 8606 across multiple tax years for a backdoor Roth. They confirmed exactly what needed to be reported each year and why an amendment wasn't necessary in my situation.

Does this mean there's a potential issue if OP's CPA filed the Form 8606 for both spouses in 2021, even though one spouse didn't do the conversion until 2022? Shouldn't the CPA have only filed Form 8606 for the spouse who did the full process in 2021?

No, that's actually exactly what should have happened. Both spouses should have Form 8606 filed for 2021 to report the non-deductible contributions to the Traditional IRAs. That's step 1 of the process and happened for both spouses in 2021. Only the spouse who did the conversion in 2021 would report that conversion on the 2021 Form 8606. The other spouse who waited until 2022 to convert would report their conversion on the 2022 Form 8606, but still needed to establish the non-deductible basis in 2021. That's why OP got a 1099-R for 2021 (showing their conversion) but the spouse didn't get one until 2022. Each step is reported in the year it happens, but both steps are needed for the complete backdoor Roth process.

Many people don't know exactly what their annual income will be until late in the year, especially if they get bonuses or have variable income. It's pretty common for people to contribute to Roth IRAs throughout the year and then discover at year-end that they've exceeded the income limits, requiring a recharacterization.

Exactly what the other commenter said - we contribute monthly to our IRAs throughout the year, and we didn't realize until December that a bonus and some unexpected consulting income had pushed us over the limit. By then we had already made full contributions to our Roth IRAs for the year. Honestly, we'd never had to do a backdoor Roth before, so the whole process was new to us. Next time we'll just contribute to Traditional and convert right away since our income will likely be over the limit again.