Rolling a SEP IRA into a 401k, then doing Back door Roth
I have a SEP IRA for my business. I am also employed by a large corporation where I have a 401k. The SEP IRA is preventing me from doing a back door Roth contributions, unless I pay the pro rata portion of taxes on the SEP IRA. I can however, roll my SEP IRA into my company’s 401k plan. With out the SEP I can now do a non-taxable Back door Roth IRA. My question is about the timing of it. Could I contribute to my SEP, Roll it into my 401k, then contribute to a non-deductible IRA and do a Roth conversion all in the same year?
Permalink Submitted by Alan - IRA critic on Thu, 2019-10-24 00:23
Yes, as long as the SEP IRA balance is 0 on the last day of the year, your back door Roth conversion will be non taxable. You probably would do the SEP rollover late in the year so any SEP contributions made throughout that year would be rolled out as of year end. I would not convert the ND contribution until the SEP balance has been accepted by your 401k plan. That eliminates a conversion that turns out to be mostly taxable if the 401k for whatever reason does not accept the IRA rollover.