Backdoor ROTH and Pro-Rata Rule
Hello,
I am working with a husband and wife, neither have a traditional IRA and have been instructed by their CPA to do the backdoor ROTH for last year and this year. My question is the wife has an old TSA, that she wants to roll into a Traditional IRA, if we were to do this would this cause the pro-rata rule to trigger for the year of 2023 if we were to complete the rollover this year?
Thank you!
Permalink Submitted by David Mertz on Fri, 2023-04-07 17:05
An amount rolled over to a traditional IRA from this employer plan, resulting in the individual having a non-zero balance in traditional IRA at the end of 2023 would would result in a portion of Roth conversion being taxable. For the backdoor method to work as intended, the individual’s year-end balance in traditional IRAs must be zero.