Backdoor Roth IRA and SEP IRA
Does the pro rata rule apply if a person wants to do a back door Roth IRA contribution via non deductible contributions to a new traditional IRA, but also owns a SEP IRA funded with pre tax contributions?
Thanks!
Does the pro rata rule apply if a person wants to do a back door Roth IRA contribution via non deductible contributions to a new traditional IRA, but also owns a SEP IRA funded with pre tax contributions?
Thanks!
Permalink Submitted by David Mertz on Fri, 2014-10-10 17:01
Yes, the SEP IRA must be included in the pro-rata calculation. A significant balance in the SEP IRA will make the Roth conversion mostly taxable. See Form 8606 line 6: http://www.irs.gov/pub/irs-pdf/f8606.pdf