Backdoor Roth with Existing Simple IRA
We have a client that has made the non-deductible IRA contribution of $5,500 and converted that same amount to a Roth IRA. We just found out that they started a Simple IRA this year. We estimate that the year-end balance on the Simple IRA will be $1,800.
Using the pro-rata rule, we estimate that $4,143.84 of the conversion is after-tax and $1,356.16 is pre-tax. Our question surrounds the leftover after-tax funds. We have converted the entire IRA to a Roth leaving only the Simple IRA. Does the Simple IRA now have $1,356.16 in after-tax funds? If so, is that tracked on 8606?
Permalink Submitted by Alan - IRA critic on Thu, 2017-09-28 23:02
Yes, the SIMPLE IRA has a basis of 1356, which actually applies to any non Roth IRA he might have a balance in. This basis will appear on line 14 of the 8606 reporting the conversion.