Hello,

Please see below.

The client made non-deductible IRA contributions and subsequent Roth conversions as follows:

• 4/8/2024: Contributed $7,000 for 2024 and $6,500 for 2023 (total $13,500) to a non-deductible Traditional IRA.
• 4/11/2024: Converted the entire $13,500 to a Roth IRA.
• At the time of conversion: No other IRA accounts existed.
• 10/7/2024: Contributed $11,000 to a SEP IRA.
• 4/9/2025: Contributed another $7,000 as a non-deductible IRA contribution.

Her husband followed a similar pattern—making non-deductible IRA contributions and completing a Roth conversion—but he does not have a SEP IRA.

Questions:

1. Since she completed the Roth conversion on 4/11/2024 before the SEP IRA contribution on 10/7/2024, does the aggregation /pro-rata rule still apply for 2024?
2. If yes, should we use the SEP IRA balance as of 12/31/2024 or as of the contribution date (10/7/2024) to determine the pro-rata calculation?
3. Based on this information, if the pro-rata rule applies, we would need to aggregate the amounts as follows:
   • Total IRA funds = $13,500 (converted) + $11,000 (SEP IRA balance) = $24,500.
   • Therefore, $11,000 ÷ $24,500 = 44.9% of the conversion would be taxable.
     Is this calculation correct?
4. How should we report the taxable portion of the conversion in the software — under the Form 1099-R input section (box 2a taxable amount)?— and should we also complete Form 8606 to reflect the non-deductible basis and conversion?
5. For 2025, she plans to contribute another $9,000 to the SEP IRA and she already contributed $7,000 to a non-deductible IRA. In that case, would 100% of the conversion be taxable?
   • Alternatively, can she withdraw the $7,000 non-deductible contribution (by 10/15/2025) and move it to a taxable brokerage account ignore doing the Roth conversion?
   • Or would it be better for her to stop SEP IRA contributions altogether and only do the non-deductible IRA plus Roth conversion strategy going forward?
6. Does any of this affect her husband’s IRA conversion, given that he has no SEP IRA or other pre-tax IRA balances?

Thank you,