2019 SEP contribution/reverse rollover/back-door Roth IRA
Dear Alan et al,
I have a client who is eligible for a $56,000 SEP contribution for 2019. He currently has a $0 balance in his SEP. Our plan is to:
1. Fund the SEP for $56,000 (providing him with tax relief on his 2019 tax return) by 10-15-2020
2. Roll the SEP up into his 401k by 12-31-2020 leaving a $0 balance in his SEP
I have two questions:
1. Would this preserve his ability to do a backdoor Roth IRA this year? He has $0 in any other Traditional IRAs.
2. Would the 2019 SEP contribution cause his 2019 backdoor Roth IRA conversion to be taxable? His 12-31-2019 SEP and IRA balance was $0.
With gratitude,
Chris
Permalink Submitted by Alan - IRA critic on Wed, 2020-09-30 14:42
The timing is OK such that his back door conversions for both 2019 and 2020 will be non taxable except for any small amount of earnings on the ND contribution prior to conversion.