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How, EXACTLY, doe you do a backdoor Roth.

1,845 Views | 8 Replies | Last: 6 yr ago by SoupNazi2001
I Drink Your Milkshake
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I Drink Your Milkshake
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AG
Well, screwed that up.

Is it as simple as just opening Traditional IRA's, depositing into traditional IRA, transferring to Roth IRA, and not deducting the contribution tax return? What am I missing?

Seems like one of those things where the concept is easy but the execution has some nuance or something.
Ragoo
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AG
in fidelity:
fund Traditional 5500 from bank account, or other brokerage account
then reclassify the money into a ROTH. There is a different term used instead of just "transferring" money. The window looks different too.
AggieT
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AG
Contribute to a traditional IRA.
Convert the money to a Roth
Pay taxes on any gains that occurred before the conversion (usually nothing).

Save yourself a Turbo Tax headache and do the conversion in the same year as you make the contribution. (i.e. do both in 2017. Don't contribute in 2017 and then do the conversion in 2018.)

Do you currently have any pretax IRA accounts?
I Drink Your Milkshake
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AG
Only pretax account I have is a rollover (pre tax) IRA through Vanguard. Wife and I both have Roths through Vanguard.

Can I move money from my Rollover IRA? Then just open a traditional for my wife to move hers out of?
AggieT
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AG
Google pro rata rules for your ira. Since you have pretax money in your ira the tax implications probably aren't good.

For your wife, yes.
Ragoo
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AG
Iirc if you rollover an individual IRA to a ROTH you have to roll them all over.
GarlandAg2012
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AG
Make sure you include forms 5498 and/or 8606. I got a letter from the IRS saying my 2015 rollover was a distribution from a Traditional IRA and that I owed tax on it. It will get cleared up, but it's still annoying.

Also, there is some debate as to how it will be treated if it ever goes to court. Check out the "step transaction doctrine":

https://www.irahelp.com/slottreport/backdoor-roth-conversion

It seems most people aren't having issues with backdoors but its good to be informed of all the potential issues.
Harkrider 93
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AG
You can roll your pretax Trad IRA to your 401k this year, if the 401k allows it.

Next year, you can do the backdoor Roth for you.

The backdoor Roth can be fun around tax time, so make sure you are paying attention that the conversion didn't create a tax (or much of one).
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