Back Door Roth IRA
Does the Pro-Rata Rule apply if you were to complete a Back Door Roth IRA contribution/conversion at the beginning of the year with no other IRA balances, but rollover a 401k into a Traditional IRA prior to year-end?
Does the Pro-Rata Rule apply if you were to complete a Back Door Roth IRA contribution/conversion at the beginning of the year with no other IRA balances, but rollover a 401k into a Traditional IRA prior to year-end?
Permalink Submitted by David Mertz on Tue, 2019-12-10 18:39
Yes. The rollover of the 401(k) to the traditional IRA before year-end increases the year-end value of the participant’s traditional IRAs that must be included on line 6 of Form 8606. This largly increases the taxable amount of the Roth conversion and increases the amount of basis in nondeductible traditional IRA contributions that remains in the participant’s traditional IRAs to be applied to traditional IRA distributions in future years, compromising the intent of the backdoor Roth.