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2016 $5,500 nondeductible IRA +$5,500 2017 IRA =$11,000 2017 Backdoor Roth ?

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  • 2016 $5,500 nondeductible IRA +$5,500 2017 IRA =$11,000 2017 Backdoor Roth ?

    If I open nondeductible IRA for 2016 and then roll my tax-deferred IRA balance into 401k in 2017(its to late for 2016) will I be able to do backdoor Roth for 2017 on a whole $11,000 nondeductible IRA amount (plus tax if any gains) ? Thank you.

  • #2
    Not sure I understand. Just to clarify - did you have a balance in a tax-deferred IRA on 12/31/16?
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3




      Not sure I understand. Just to clarify – did you have a balance in a tax-deferred IRA on 12/31/16?
      Click to expand...


      Yes .

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      • #4
        If I'm understanding correctly, you can backdoor all of it but the conversion of the 2016 portion would be subject to the pro-rata rule and so you'd owe some taxes since you still had a balance in a tax-deferred IRA on 12/31/16. The 2017 portion will not be subject to the pro-rata rule as long as you roll that tax-deferred IRA into your 401k before 12/31/17.

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        • #5




          If I’m understanding correctly, you can backdoor all of it but the conversion of the 2016 portion would be subject to the pro-rata rule and so you’d owe some taxes since you still had a balance in a tax-deferred IRA on 12/31/16. The 2017 portion will not be subject to the pro-rata rule as long as you roll that tax-deferred IRA into your 401k before 12/31/17.
          Click to expand...


          Not true. The 12/31/16 previous IRA balance is irrelevant, because the full conversion is occurring in 2017. It also does not matter if the 2016 contribution occurs in 2016 or 2017 as long as it is before the 2016 tax filing deadline. As long as the previous IRA balance is rolled over to the 401k in 2017 it will not be involved in the pro-rata conversions. In fact you should be able rollover the entire pre-tax balance to the IRA and roll just the non-deductible basis to the Roth IRA.

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          • #6




            Not true...

            Click to expand...


            I was wondering about that as I was typing that response. Good to know. Thanks for setting me straight.

             

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