ROTH Conversions and BAck Door ROTH
Client has an IRA account that was a deductible 2020 contribution for $7,000 .
For 2021 same client wants to make non deductible IRA contribution so that she can immediately convert to a ROTH.
She wants to contribute $7,000 as well.
Question: Can she make 2021 contribution into the same account she had put the 2020 contribution?
CAn she mingle both contributions and later convert the $14,000 to a ROTH?
Or, must she keep these contributions separate?
Permalink Submitted by Alan - IRA critic on Wed, 2021-12-08 22:14
Because all non Roth IRA accounts are treated as a single combined account, it does not matter whether the new contribution is made to a new account or to the existing IRA account. Either way, since her TIRA basis is 50% of the total value, 50% of the conversion will be taxable. If she converts all 14,000 the taxable portion is 7000. If she converts 7000, the taxable amount will be 3,500. Conversions are reported on Form 8606, which performs the math to determine the taxable amount. Line 6 of the 8606 asks for the total value of all non Roth IRA accounts.