The deadline for 2023 tax returns is April 15, 2024. Here are some friendly reminders.
Make a contribution. If you worked in 2023, check with your tax advisor to see if you are eligible to make a prior year traditional or Roth IRA contribution. You can make 2023 IRA contributions until April 15. Work closely with your tax advisor to be sure you don’t overcontribute. If you contribute more than your limit, you are subject to a 6% tax on the excess amount.
Report your contributions. If you made a deductible contribution for 2023, be sure to claim the deduction on your tax return. Non-deductible contributions must be reported on Form 8606. Please note that Roth contributions are not reported with your return. However, work with your tax advisor to keep track of all Roth contributions; you will need the total of those when you start taking distributions.
Consider a backdoor Roth contribution. The backdoor Roth contribution has historically been a great tool for high earners to take advantage of Roth IRAs even after exceeding the income limits for standard contributions. There are a few steps to accomplish it: Make a non-deductible IRA contribution to a traditional IRA. Then, convert that contribution to a Roth IRA. Although the steps are simple, the reporting is decidedly complicated!
With a backdoor Roth contribution, you must report both sides of the transaction (the non-deductible contribution and the conversion) on Form 8606 and file it with your taxes. Form 8606 will calculate any taxable amount of the conversion that may be necessary to report with your return. It is crucial that you coordinate these with your tax advisor to be sure that you fully understand the potential tax ramifications and are reporting these in the correct years.
Report your Qualified Charitable Distributions (QCDs). If you made a QCD last year, report it on your Form 1040 tax return. Owners typically report the full amount of the distribution on the line for IRA distributions (4a) and then enter the amount not donated as a QCD (total distributions minus the QCDs) on line 4b, indicating the term “QCD” next to line 4b. Consult your tax advisor first, as your circumstances might be different.