Nondeductible IRA comingled | Ed Slott and Company, LLC

Nondeductible IRA comingled

Recently, a couple retired and opened Rollover IRAs to receive their 401k balances. They also had nondeductible IRA accounts with balances that they had not yet converted to Roth IRAs. Now that there are two IRAs, is it too late to convert the nondeductible balances to Roth without taxation of the conversion/without looking at the total IRA balances? There are records of the basis of the nondeductible contributions from previous years, but were never converted.

Yes, it is too late because the taxable portion of any conversion will probably be very high, much higher than it would have been had the conversions been done in 2019 before the 401k rollovers. That said, if this or some future years are low taxable income years, it may still be wise to execute incremental conversions, starting with the spouse that has the highest basis % (figured on Form 8606) for their IRA.  Note that even if they converted before this rollover year, the taxes on any conversion would reflect the gains that occurred from the non deductible contributions.  

 

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