Back Door Roth
To avoid the pro-rata rule interference, if a client has traditional IRA balances and has an active account in an employer qualified plan he/she can move those funds out of the T-IRA into the qualified plan to establish a zero balance T-IRA. Can the client in this instance move the funds into the QP and then do the Back Door Roth (contribution to traditional, then convert to the Roth) in the same tax year? Or do they need to do the QP sweep first and then wait until the subsequent tax year to do the BDR?
Permalink Submitted by Alan - IRA critic on Wed, 2022-02-09 15:45
The requirement is that the TIRA balance at the end of the year of the back door conversion be 0, therefore a ND IRA contribution could be made early in the year, and the rollover of pre tax TIRA balances by the end of that year. That said, because of uncertainty whether the employer plan will accept the rollover, it is generally recommended to complete that rollover first.