back door Roth IRA contributions and IRA balance of $0 timing
Hello! Our client, employed age 60, has only 1 IRA account with a balance. His 401k plan allows incoming IRA rollovers. We propose to rollover his entire IRA to his 401k in 2021 leaving a $0 IRA. Once completed, we’d like to make back back door Roth contributions. Can we make the back door Roth contribution in 2021 or do we have to wait until 2022?
Thanks in advance for you guidance!
Permalink Submitted by Alan - IRA critic on Thu, 2021-07-15 16:52
The non deductible TIRA contribution can be made for 2021, but it is risky to make that contribution and specifically to convert it before the 401k accepts the IRA rollover. Should the 401k not accept the rollover for whatever reason, the client would then be stuck with a mostly taxable conversion, and of course that conversion can no longer be recharacterized. The most likely reason the 401k could balk is a restriction of IRA rollovers to rollovers of “rollover” or “conduit” (former term) IRA accounts. Often the 401k will require a certification by the client in various forms that the IRA or prior IRAs have never received a regular IRA contribution. Once the IRA funds have actually been accepted by the 401k, client can make the contribution and convert this year.