For years there has been concern by some planners that a back-door Roth conversion might be considered a step transaction by IRS. Most planners, however, did not feel that a back-door Roth fit all the criteria of a step-transaction.
In the conference report for the Tax Cuts and Jobs Act, Congress weighed in and said “Although an individual with AGI exceeding certain limits is not permitted to make a contribution directly to a Roth IRA, the individual can make a contribution to a traditional IRA and convert the traditional IRA to a Roth IRA.” Since Congress writes the tax law and congressional intent is a big part of interpreting the law, it was now pretty clear that the back-door Roth is a viable planning strategy.
