Backdoor Roth
I have a client who has a beneficiary IRA and a Roth IRA that they own. They make too much money to directly contribute to their Roth IRA. Can they set up a traditional IRA and do a backdoor Roth IRA contribution and not worry about the pro rata rule, or will the beneficiary IRA trigger the pro rata rule?
Permalink Submitted by Alan - IRA critic on Thu, 2021-04-08 18:37
Beneficiary IRAs are disregarded when determining the taxable amount of a conversion or distribution of one’s own IRA. Any non deductible TIRA contributions that client makes are reported on Form 8606 as well as the value of all non Roth IRAs, but not any inherited IRAs. Therefore, client only needs to be concerned if they have other TIRA, SEP, SIMPLE, or rollover IRA accounts that they own.