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Backdoor Roth IRA - Can I make multiple contributions this year?

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  • #16

    I am in a similar boat. My wife had a pension from her former employer that she was able to roll into a roth IRA this year. We know that this was a taxable event since it was pre-tax dollars rolling into a roth IRA. We also individually will make too much money to contribute to a roth IRA this year, but we were wondering if she could backdoor into a roth IRA this year even though she already “contributed” to it with the rollover. Many thanks.
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    Rollovers, conversions, and contributions are all separate entities.

    Contributions are when you take money from outside a retirement account (like cash) and put them into a retirement account.  This is what is limited to $5,500 for IRAs.

    Conversions (changing pretax to Roth) and Rollovers (pretax to pretax or Roth to Roth) are *not* contributions and do not count toward that limit.

    So you can still make $5,500 *each* in IRA contributions for 2017.  You likely make too much to deduct traditional contributions or to make direct Roth contributions, so the answer is to make a traditional contribution, don't deduct it on your taxes, and convert it to Roth as soon as you're able.  This is what the "backdoor" Roth is.

    Your IRAs have no bearing on her IRAs.  Her contribution limit or pretax balances for factoring tax on pro rata conversions have no effect on yours.


    • #17
      JFoxCPACPF, love your contributions and insights on this post but i'm still a bit confused. So I opened a traditional IRA in 2015 and contributed 5500 that was pre-tax, in 2016 my income rose and I made a contribution in the same account that was not tax deductible. Incidentally, I opened a SEP IRA last year and made pre-tax contribution, my understanding was that to qualify for a back door Roth I could open a solo 401k( currently 1099), roll over the SEP IRA and traditional IRA from 2015 and 2016, close the SEP IRA, make a traditional IRA contribution and then roll over to the Roth. However, the representative at Schwab told me that since  still had a balance on the account this year it would not be possible, is this correct? Would appreciate your response, thanks in advance


      • #18
        See if you can get a different representative. I cannot find any fault with what you are proposing. As long as the SEP and pre-tax IRA are both emptied before 12/31, you are fine with the backdoor Roth. As I'm sure you're aware, you'll pay taxes on any of the growth in the 2016 nondeductible IRA.

        Besides, it's really not the rep's business. You can do this and it's up to you or your CPA to correctly complete the form 8606 to show contribution, basis, and conversion. Be sure you filed the form 8606 for 2016, btw.

        If, for some reason, you cannot get this accomplished before 12/31, you can always convert in January - it's only a few weeks longer.
        My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
        Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients