Backdoor Roth, but need to move tax deferred IRA $$$ first; Deadline question
Hi,
I would like to invest in a backdoor Roth for 2020. As I understand it, I have until my 2020 taxes are filed to do that (so let’s say 04/15/21).
I currently do have a tradition IRA, SEP IRA and rollover IRA. All of these are in the process of being moved to a solo401K at Fidelity.
I am curious about the deadlines for these moves.
If I move all of the above IRAs ==> solo401K by 12/31/20, can I invest in a 2020 Roth using the backdoor in 2021 as long as this is performed by 04/15/21?
If all of the IRAs DO NOT get migrated into a solo401K by 12/31/20, then the soonest I could perform a backdoor Roth would be for the 2021 tax year, correct?
Thanks!
Permalink Submitted by David Mertz on Fri, 2020-12-18 17:17
A “backdoor Roth” is nothing more than a traditional IRA contribution followed by a Roth conversion. IRA contributions are made *for* a particular year but Roth conversions are done *in* a particular year, not *for* a particular year. Only if the Roth conversion is done in 2020 would you need to have the TIRA balance moved to the solo 401(k) by 12/31/2020. If you don’t make your 2020 TIRA contribution until 2021, your Roth conversion of that contribution won’t happen until 2021 and will be reportable on your 2021 tax return, not on your 2020 tax return, so you’ll only need to have the rest of your TIRA balance moved to the solo 401(k) by 12/31/2021. To apply all of your basis to the conversion, your TIRA balance needs to be zero at the end of the year in which you do the conversion. Whether you do the Roth conversion in 2020 or 2021, your traditional IRA contribution for 2020 will go on your 2020 tax return (Form 8606).