Rollover of IRA back to 401k in same year as backdoor Roth Conversion
Taxpayer has IRA with 100% pretax money as well as 401k with 100% pretax money.
Can taxpayer roll IRA money back into 401k (assume plan allows for it) and do back door Roth in same calendar year or must they wait until calendar year following year which they roll IRA back to 401k so that none of the IRA funds are included in the pro-rata calculation?
Another way to frame the question is what valuation dates are used in determining pre tax portion of any IRAs used in calculating the taxable portion of a Roth conversion.
Thanks as always!
Howard
Permalink Submitted by Alan - IRA critic on Mon, 2020-12-28 22:54
They can do the back door Roth in the same calendar year as the rollover to the 401k. The valuation date is 12/31 of the year that the conversion is done, as that is the year that requires the IRA balance to be 0 at year end. Since acceptance of the IRA pre tax money can become questionable, it is less risky to complete the TIRA rollover to 401k before making a ND contribution and converting. Therefore, taxpayer could complete the rollover early in 2021, make a ND contribution for both 2020 (by 4/15) and 2021 and convert them both with a single conversion. The conversion will be non taxable.