if someone converts all of a traditional IRA to a Roth and the traditional IRA was made by non-deductible contributions and then later in the year rolls over a prior employer qualified plan to a traditional IRA, do they have to calculate the taxable/non-taxable amount of the conversion? Is the fair market value of the IRA from rollover included in the calculation or are their any timing/ordering rules?
Thanks,
John
Unfortunately, it is not an uncommon and potentially expensive misktake to think that the timing of Roth conversions and rollovers matter. They do not.
You include the pre-tax balances of all traditional SEP and SIMPLE IRA accounts on 12/31 in Line 6. It does not matter when any non-deductible traditional IRA contributions, rollovers or Roth conversions occur. Only the (prior year non-deductible basis balance + non-deductible basis increase) and the 12/31 pre-tax balance are used for the pro rata taxation determination.
Prior to the effective date of the TCJA, it was possible to recharacterize Roth conversions. Sadly, it is no longer possible with the TCJA.
Edited to correct SECURE ACT to TCJA.
Permalink Submitted by Alan - IRA critic on Fri, 2021-02-19 20:24
You meant the TCJA eliminated conversion recharcterizations in 2018, not the Secure Act.