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Backdoor Roth – is it too late?

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  • Avatar marathonrunner40 
    Participant
    Status: Spouse
    Posts: 3
    Joined: 07/20/2019

    In early 2019 we had to recharacterize our 2018 Roth IRA contributions to nondeductible Traditional IRA contributions. For 2019 we want to make backdoor Roth IRA contributions. However, we still have the 2018 contributions sitting in Traditional IRA accounts. Can we convert both the 2018 funds and the 2019 funds together from the Traditional accounts to  backdoor Roth IRAs or will the pro-rata rule apply since we have still have the 2018 money sitting there (even though it wasn’t recharacterized until early in 2019)?

    #232079 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8113
    Joined: 01/09/2016

    Yes, you can convert all of those funds to the Roth.

    Welcome to the forum!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #232088 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4410
    Joined: 01/08/2016
    Can we convert both the 2018 funds and the 2019 funds together from the Traditional accounts to  backdoor Roth IRAs

    Click to expand…

    you can convert anytime. there is no restriction on amount or time.

    will the pro-rata rule apply since we have still have the 2018 money sitting there (even though it wasn’t recharacterized until early in 2019)?

    Click to expand…

    your 2018 nondeductible contribution is taxed at 0, however, any gains youve made since then will be taxed at your marginal rate.

    since you are converting 100%, your prorata will only last this year, since you are converting 100% and nothing will be left over to pro-rate.

    #232096 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 511
    Joined: 06/12/2017

    It’s only the timing of the contributions that matters. Conversion can be done anytime, with the only taxes due being those on the growth.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #232118 Reply
    Avatar marathonrunner40 
    Participant
    Status: Spouse
    Posts: 3
    Joined: 07/20/2019

    Thank you for your replies.

    One more question…My hubby’s mother passed away 2 years ago and left him an IRA that he is required to take a minimum distribution from each year. I’ve read that this particular IRA (having received it as a beneficiary) doesn’t count toward the pro rata calculation. Can you please confirm that this is true?

    #232597 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 511
    Joined: 06/12/2017

    Yes. Inherited IRAs do not come into play for the pro-rate calculation.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #232627 Reply
    Avatar marathonrunner40 
    Participant
    Status: Spouse
    Posts: 3
    Joined: 07/20/2019

    Thank you! I appreciate your quick reply.

     

    #232776 Reply

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