Back Door Roth

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coffeehubcap
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Joined: Wed Sep 19, 2007 7:56 pm

Back Door Roth

Post by coffeehubcap » Wed Jan 17, 2018 7:34 pm

What's the situation with the IRS? My son doesn't qualify to contribute to a Roth because he and his wife live together and file separately since she has student loans to pay off and doesn't make more than $50,000 a year. His salary is $100,000 so because they file separately he's out of contributing to a Roth but he could do a Back Door Roth.

Doesn't make sense to me.

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FiveK
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Re: Back Door Roth

Post by FiveK » Wed Jan 17, 2018 8:17 pm

Don't blame the IRs - they are merely following the law.

You could contact your congressional reps regarding subparagraphs (B) and (C) of US Code section 219(g)(2), and 219(g)(3)(B)(iii). See 26 U.S. Code § 219 - Retirement savings.

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Epsilon Delta
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Re: Back Door Roth

Post by Epsilon Delta » Thu Jan 18, 2018 1:13 am

FiveK wrote:
Wed Jan 17, 2018 8:17 pm
Don't blame the IRs - they are merely following the law.

You could contact your congressional reps regarding subparagraphs (B) and (C) of US Code section 219(g)(2), and 219(g)(3)(B)(iii). See 26 U.S. Code § 219 - Retirement savings.
Surely you mean 26 U.S. Code § 408A - Roth IRAs
Specifically 408A(c)(3) and 408A(d)(3)

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FiveK
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Re: Back Door Roth

Post by FiveK » Thu Jan 18, 2018 1:31 am

Epsilon Delta wrote:
Thu Jan 18, 2018 1:13 am
Surely you mean 26 U.S. Code § 408A - Roth IRAs
Specifically 408A(c)(3) and 408A(d)(3)
Those do indeed play a part. Namely, that limits based on MAGI exist. It's in § 219 that the dollar value of the limits are defined. :sharebeer

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Epsilon Delta
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Re: Back Door Roth

Post by Epsilon Delta » Thu Jan 18, 2018 2:11 am

FiveK wrote:
Thu Jan 18, 2018 1:31 am
Epsilon Delta wrote:
Thu Jan 18, 2018 1:13 am
Surely you mean 26 U.S. Code § 408A - Roth IRAs
Specifically 408A(c)(3) and 408A(d)(3)
Those do indeed play a part. Namely, that limits based on MAGI exist. It's in § 219 that the dollar value of the limits are defined. :sharebeer
Read them again, the dollar values for Roth income limits are all in 408A. Pay particular attention to "For purposes of this subsection" and "For purposes of this paragraph".

408A(c)(3)(B)(ii)(III) and 219(g)(3)(B)(iii) both say "In the case of a married individual filing a separate return, zero." but the first is about a Roth contribution and the second about a deductible IRA contribution. This will be apparent if you look at the preceding 408A(c)(3)(B)(ii)(II) and 219(g)(3)(B)(ii) because the income limits for Roth and deductible IRA contributions are only the same for married filing separately.

parts of section 219 are included in section 408A by reference, but subparagraphs (B) and (C) of section 219(g)(2) are rounding rules, hardly the meat of the matter.

coffeehubcap
Posts: 185
Joined: Wed Sep 19, 2007 7:56 pm

Re: Back Door Roth

Post by coffeehubcap » Thu Jan 18, 2018 10:23 am

I'm not a lawyer and I don't play one on TV. But, you seem knowledgeable about the law. Are back door roth's legal? If so, and not done correctly what are the consequences? Any step-by-step rules for doing it right if it is legal?

nolesrule
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Re: Back Door Roth

Post by nolesrule » Thu Jan 18, 2018 10:39 am

coffeehubcap wrote:
Thu Jan 18, 2018 10:23 am
I'm not a lawyer and I don't play one on TV. But, you seem knowledgeable about the law. Are back door roth's legal? If so, and not done correctly what are the consequences? Any step-by-step rules for doing it right if it is legal?
1. Contribute (non-deductible) money to a Traditional IRA.
2. Convert the Traditional IRA to Roth IRA
3. Report the non-deductible IRA contribution and Roth conversions on Form 8606 with your tax return.

Most people who make a mistake screw up step 3.

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FiveK
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Re: Back Door Roth

Post by FiveK » Thu Jan 18, 2018 12:17 pm

Epsilon Delta wrote:
Thu Jan 18, 2018 2:11 am
the dollar values for Roth income limits are all in 408A.
Indeed they are. Could've sworn they weren't there last night. ;) Thanks!

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