2023 Backdoor Roth IRA Home Base

[royale with cheese]

first time poster here
I opened a traditional IRA at Fidelity in Dec 2022, contributed 6K and did a conversion a week later to a newly opened Roth IRA.
On Dec 30, 2022, I received a dividend of $5.84 (SPAXX) into my traditional IRA account although the account was completely empty prior to that since I had converted the entire 6K out of it on Dec 16.
Now I want contribute for 2023 and do the same process but have the problem of breaking the pro-rata rule since I have $5.84 in my tIRA.
I'm sure this has been answered a million times but I'm not completely getting it.
Do I still fund the tIRA w/ 6500 (max contribution for 2023) and then convert the entire balance of 6505.84 into my Roth IRA? Then I'd just have to fill out form 8606 correctly for tax year 2023, which I'd be completing sometime before April 2024?? Thanks in advance!

[GasFIRE]

first time poster here
I opened a traditional IRA at Fidelity in Dec 2022, contributed 6K and did a conversion a week later to a newly opened Roth IRA.
On Dec 30, 2022, I received a dividend of $5.84 (SPAXX) into my traditional IRA account although the account was completely empty prior to that since I had converted the entire 6K out of it on Dec 16.
Now I want contribute for 2023 and do the same process but have the problem of breaking the pro-rata rule since I have $5.84 in my tIRA.
I'm sure this has been answered a million times but I'm not completely getting it.
Do I still fund the tIRA w/ 6500 (max contribution for 2023) and then convert the entire balance of 6505.84 into my Roth IRA? Then I'd just have to fill out form 8606 correctly for tax year 2023, which I'd be completing sometime before April 2024?? Thanks in advance!

You have the process correct. You will owe tax at your marginal rate on the $5.84 so the pro-rata rule is basically rounding error. The same thing will probably happen next year as your IRA contribution will earn interest even if you convert to Roth the next day.

[Zzyzx]

Interesting. The money that I had sent last week to the "settlement account" wasn't available to withdraw, so I funded IRA on 1/1 by cashing out a non-settlement account MMF. This am, the funds are in my IRA, but not available to withdraw (convert).

similar issue with fidelity, $ cleared into TIRA settlement fund yesterday but fidelity won't let me convert to Roth this am 1/4

[jacoavlu]

I did the same thing by using money already at Vanguard and was able to convert today. So much smoother than depositing money from outside of Vanguard into the TIRA.

I’ve always been able to simply initiate deposit to TIRA from linked bank account 1/1, funds show up on first biz day, able to Roth convert next day.

I think it still works for me bc I’ve never transitioned to brokerage IRA account, maintain mutual fund only IRA, despite all the efforts Vanguard put into trying to force users to convert - emails, snail mails, app alerts, and now can’t transact in the account via mobile app have to use website.

But I basically only interact with the account once a year so I don’t want to transition to brokerage

[FIREshrink]

Yeah. Initiated contribution from Vanguard brokerage settlement 1/1 so presumably effectively 1/3. I was able to convert this morning (1/4). Will be interesting to see how much spare interest shows up in the TIRA.

Its pretty clear that at Vanguard, if ease and rapidity are one’s back door Roth goals, contributing from preexisting brokerage settlement account funds is the way to go.

agreed this was the easiest year ever just by moving the money to settlement one week ago

[artemis]

I'm planning to do mine early next week (along with making my annual DAF contribution). I moved some funds from my checking account over to my Vanguard money market account, and need to give them two days or so to settle before I can do my backdoor Roth for the year.

[Bmac]

Yeah. Initiated contribution from Vanguard brokerage settlement 1/1 so presumably effectively 1/3. I was able to convert this morning (1/4). Will be interesting to see how much spare interest shows up in the TIRA.

Its pretty clear that at Vanguard, if ease and rapidity are one’s back door Roth goals, contributing from preexisting brokerage settlement account funds is the way to go.

And the answer appears to be $0.86. This was for a $7500 contribution. At least that was the amount being credited to the IRA settlement as of 2 pm west coast time today which I have now also converted to the Roth.

[bovie]

Checking account at Schwab.

Transfer money to Schwab TIRA —> convert to RIRA with dedicated “Roth conversion” option —> buy desired fund(s).

Entire process done in 5 minutes, start to finish.

[Kamban]

Checking account at Schwab.

Transfer money to Schwab TIRA —> convert to RIRA with dedicated “Roth conversion” option —> buy desired fund(s).

Entire process done in 5 minutes, start to finish.

Having a local Schwab account with a good balance has some advantages. Met the usual front desk person who knows me well ( I also have an assigned person that I don't use ) on Dec 30th to deposit some checks. Mentioned about doing the backdoor like last year. She said she will take care of it on 1/4.

Today i saw that $7.5K was transferred from the brokerage to traditional IRA and immediately taken out and put into my Roth. Same for my wife. No paperwork or computer clicks or messing it up. Yes I could have done it within 5 mins like you, but why have service available if I don't use it.

I have always found Vanguard web interface clunky and non-intuitive.

[jacoavlu]

Checking account at Schwab.

Transfer money to Schwab TIRA —> convert to RIRA with dedicated “Roth conversion” option —> buy desired fund(s).

Entire process done in 5 minutes, start to finish.

intrigued. happy with schwab checking for more than a decade, just been lazy kept IRAs at VG. Schwab usually pretty tight with the bonuses

[bovie]

intrigued. happy with schwab checking for more than a decade, just been lazy kept IRAs at VG. Schwab usually pretty tight with the bonuses

Make the switch, bonus or no bonus.

[Zzyzx]

2023:
$7,500 after tax into solo IRA then to Roth for those of us >50yo right?

https://www.irs.gov/newsroom/taxpaye...eases-for-2023

• The limit on annual contributions to an IRA will increase to $6,500. The IRA catch‑up contribution limit for individuals age 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.

• The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan will increase to $7,500.

• The catch-up contribution limit for employees age 50 and over who participate in SIMPLE plans will increase to $3,500, up from $3,000.

[PhysicianOnFIRE]

For Vanguard, I was able to make the Roth conversion on 1/4 for my wife's mutual fund IRA account and on 1/5 for my brokerage IRA account. The screenshots looked a bit different this year since Vanguard has updated the look of some parts of the website.

How-to post is now 100% updated for 2023.

• Backdoor Roth IRA 2023: A Step by Step Guide with Vanguard

[The White Coat Investor]

Ended up taking one day more than expected, but all done now.

Also doing our MBD Roths at Fidelity. Similar problem as I have at Vanguard. They make us wait a few days for the money to settle before we can move it between accounts.

[racetoretire]

Can someone help me understand how much tax I will owe due to this stupid mistake, and if there's any way around this? I have been doing backdoor Roths for years for me and husband, no problems at all. This year I did our contributions for 2021 and 2022 in January 2022, and then rolled the $13k in each of our accounts to our Roths a few days later. However in December 2022, when trying to terminate our pension/ pooled account before the end of the year, Vanguard wouldn't do an in-kind transfer to our 401Ks but would do it into our trad IRAs so our money made a pit stop there and then we did an in-kind transfer to our 401Ks this week. However, this resulted in a significant amount of money in each of our trad iras on dec 31, 2022. In the chaos of trying to empty the pension in 2022, I completely forgot about the backdoor Roth. Can I just explain to the nice people at the irs that this was an oops. Help me understand how much I will pay in stupid tax on this. thx