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Due to a recent move I fear that I will be over the income limit for roth contributions so I just finished my first ever back door roth contribution. However, in the two days my $5500 was sitting in the money market waiting to clear it accidentially accrued $0.33 and the nice lady at Vanguard didn't tell me about the extra cents so I converted 5500.33 to the Roth. So, do I need to get the 0.33 removed or will I be ok to let it ride?
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You can convert as much as you want. Look out, those 33 cents are taxable! More might be if you have other pre-tax traditional IRAs. -
If you did a conversion from a traditional IRA to Roth, the earnings are taxable and should be left in the traditional IRA. You owe tax on that $0.33 cents. I would call Vanguard and ask them to recharacterize it as a taxable IRA contribution and let it sit there until next year.Comment
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You could have a gain or a loss when you do a conversion, but you did it right by converting it all. As the others have pointed out, the .33 is taxable. The main thing is you want to have 0 left in the traditional IRA by the end of the year (and assumes no other non-deductible IRA funds).Originally posted by Goldy View Post
You will have to fill out an IRA form 8606 for next year's taxes--which is super important so you don't end up paying taxes on your 5500 contribution twice.
Here are some step by step instructions from 2015 tax year on how to do this on turbotax (so you can get a feel for what is involved).
https://thefinancebuff.com/how-to-re...-turbotax.html (There is also a similar one for tax act)Comment
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Don't fret about it. You are supposed to always round to the nearest dollar. 5500.33 is 5500.00.Comment
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Why are you contributing now if you aren't sure? Why not wait until next january if you are on the fence? That's what we always did until we knew.Comment
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