Reverse Rollover and Backdoor Roth IRA in the same year
Hi All,
My question pertains to a client who conducted a reverse rollover and wants to make a backdoor Roth IRA contribution in the same year.
Earlier in 2020 we conducted a reverse rollover from their IRA to their 401(k). There was no basis in the IRA prior to the rollover or contributions made to the IRA for 2020. The current balance in the IRA is now $0. Would they still be eligible to conduct a backdoor Roth IRA contribution for $6,000 in 2020?
Thanks,
Max
Permalink Submitted by Alan - IRA critic on Tue, 2020-11-24 21:26
Yes. What matters is that the IRA holds no pre tax dollars or such a low amount that taxes on the conversion do not matter. In fact, because conversions can no longer be recharacterized, the reverse rollover should be done prior to the conversion to be sure the pre tax IRA dollars were accepted into the qualified plan. A non deductible contribution can then be made and immediately converted.