Backdoor Roth Conversion w/IRA Transfer
A 45 year old has 6k in a TIRA and wants to do a Backdoor Roth IRA right now for 2021 and 2022. Can she transfer the IRA to her employer sponsored 401k at anytime before year end to ensure that account balance does not count when calculating the tax owed on her Roth conversion? I can’t find anything that discusses the timing of moving a TIRA to ensure it doesn’t count in calculating how much of a conversion is subject to tax. Should she wait to do the Backdoor Roth until her TIRA is in her company 401k? Thank you!!
Permalink Submitted by Alan - IRA critic on Sun, 2022-03-27 21:37
If the pre tax 6k is rolled into the 401k anytime before year end, the conversion of the non deductible 2021 and 2022 TIRA contributions will be tax free except for any gains. Since the rollover to the 401k is not a sure thing until completed, it is recommended to complete that rollover before converting the new contributions. That said, since the pre tax balance is only 6k, it may not be worth the effort to avoid converting it. She might want to simply make the 12k of new non deductible contributions, then convert the entire 18k to Roth, owing tax on the modest 6k pre tax portion.