Backdoor Roth with small traditional IRA
An IRA owner who’s over age 50 withdrew all but about $100 of her traditional IRA. Her financial position is better now, and she wants to do a $6,500 backdoor Roth for 2018. (She’s not eligible for either a deductible contribution or a direct Roth contribution.)
What’s the simplest way from a paperwork and reporting standpoint? Take the $100 out first and then do the $6,500 nondeductible contribution and conversion? Or make the contribution first and then convert all $6,600?
Permalink Submitted by Alan - IRA critic on Tue, 2019-01-29 00:28
Bruce, I assume that the withdrawal occurred prior to 2019. The simplest way to address the intended 2019 transactions would be to make the 2018 ND contribution (and perhaps the 2019 contribution as well), and then immediately convert the entire TIRA balance. There is no difference in the 2019 taxes based on which is done first, but making the contribution first will result in one fewer transaction. Form 8606 will be easier to complete if the 100 is converted along with the contribution, than if the 100 is just distributed. Also, if the 100 is distributed but not converted, there is a 10% penalty ($10) unless the IRA owner is 59.5.