Personal Finance (Not Investing) • Backdoor Roth Conversion and pre-tax tIRA/Rollover to Roth

Hello Bogleheads,

This is for my wife's situation:

In 2021, she contributed $6000 to Roth. During filing tax return, we found we were over the income limit to contribute to Roth, so she recharacterized to traditional tIRA, which was done in 2022, but before tax filing for 2021.

When you do a recharacterization, it becomes the same as if she had contributed to the tax-deferred IRA brom the beginning.

In 2024, she converted the tIRA to Roth IRA (the same money was recharacterized to tIRA from Roth for 2021 contribution, after loss/gain, still ~$6000). (Is this also called back-door Roth?)

Yes, but only if she/ (or you, if you prepared the the tax forms) told the IRS that the $6,000 contribution was non-deductible. If that is the case, she needs Form 8606 filled out for your joint 2024 tax return. Hopefully, she also filed a Form 8606 for 2021 to tell the IRS she had a non-deductible $6,000 basis. That basis will carry over to the 2024 Form 8606.

She worked in a company for few months in 2024 and contributed ~$3000 401k (pre-tax). Just realized that the company made rollover of ~$3000 to her Roth IRA in 2024 and closed her 401k account (we probably ignored notice from the company.

She should have received a 1099-R tax form from the custodian. Call them up if you didn't get one since your data entry has to match what is on the form.

So now she converted total ~$9000 from pre-tax (~$6000 from tIRA and ~$3000 from 401k) to her Roth IRA. Will this be an issue as it is over $7000 (is this ruled by back-door Roth conversion that has $7000 limit?)

The $7,000 limit is for 2024 IRA contributions. There is no limit on conversions. If the $3k grew to $30k before she converted, she still could have converted all of it. But what a tax bill that would be!

Shall she recharacterize $3000 rollover from 401k to her tIRA?

No, everything is fine right now, unless you or she were also funding an IRA for her last year and the total went over the $7,000 contribution limit for 2024.

Statistics: Posted by celia — Mon Mar 03, 2025 1:14 am — Replies 1 — Views 134

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