Backdoor Roth Conversion
Client had too much income to contribute to a Roth in 2022. Backed that out and made them non-deductible IRA contributions. $5500 was added to an existing IRA that had $1500 in it. Now the TIRA is about $7000. Is that a problem if we want to do a conversion of the $5500? How are the aggregation rules accounted for on the tax return? If we did the backdoor conversion, 21% of the $5500 is taxable, 1500/7000 = 0.21, correct?
Permalink Submitted by Alan - IRA critic on Thu, 2023-01-26 22:37
Normally, if this 7000 account is the only Tira owned, client would convert the entire 7000 and would owe tax on 5500. No point in doing a partial conversion for amounts this small.