Timing of Backdoor Roth IRA

[sbb01]

I have until now been unable to benefit from a backdoor Roth IRA because I’ve had a large IRA balance, and the Roth conversion would be mostly taxed.

I have now (March 2023) rolled over the IRA to a 401k, so the backdoor Roth should now work well

1) can I contribute to IRA & do a backdoor Roth now for calendar year 2022, or should I not because in 2022 I still had the IRA?

2) backdoor Roth for 2023 should be fine for this year, I assume, even if the IRA was rolled over just 1 month ago?

Thanks for any advice on this.

[exodusNH]

I have until now been unable to benefit from a backdoor Roth IRA because I’ve had a large IRA balance, and the Roth conversion would be mostly taxed.

I have now (March 2023) rolled over the IRA to a 401k, so the backdoor Roth should now work well

1) can I contribute to IRA & do a backdoor Roth now for calendar year 2022, or should I not because in 2022 I still had the IRA?

2) backdoor Roth for 2023 should be fine for this year, I assume, even if the IRA was rolled over just 1 month ago?

Thanks for any advice on this.

If you had a non-zero IRA balance on Dec 31, 2022, you are subject to the pro-rata rule for your 2022 taxes.

You're in the clear for 2023. When you make your IRA contribution, make sure it's tagged for 2023. Your broker might default you to 2022 since you can make the 2022 contribution for a few more weeks.

Edit to remove wrong info.

[little_star]

I have until now been unable to benefit from a backdoor Roth IRA because I’ve had a large IRA balance, and the Roth conversion would be mostly taxed.

I have now (March 2023) rolled over the IRA to a 401k, so the backdoor Roth should now work well

1) can I contribute to IRA & do a backdoor Roth now for calendar year 2022, or should I not because in 2022 I still had the IRA?

2) backdoor Roth for 2023 should be fine for this year, I assume, even if the IRA was rolled over just 1 month ago?

Thanks for any advice on this.

If you had a non-zero IRA balance on Dec 31, 2022, you are subject to the pro-rata rule for your 2022 taxes.

You're in the clear for 2023. When you make your IRA contribution, make sure it's tagged for 2023. Your broker might default you to 2022 since you can make the 2022 contribution for a few more weeks.

This is partially incorrect. Specifically, you are subject to the pro rata rule for the year in which you do the conversion. So you can still make a 2022 traditional (non-deductible) IRA contribution (prior to the April tax due date) and a 2023 contribution.

The backdoor Roth process is two steps:

1. contribution to a traditional IRA (non-deductible). This can be done anytime between January 1 and tax due date (April of the following year). It is documented on IRS Form 8606 for the TAX YEAR for which the contribution is made.

2. conversion from traditional IRA to Roth IRA. This can be done anytime after step 1. It is documented on IRS form 8606 for the CALENDAR YEAR in which the conversion is completed.

In your case, if you contribute to a traditional IRA for the 2022 tax year now, you will need to fill out IRS Form 8606 with your non-deductible contribution documented on lines 1, 3, and 14. The value on line 14 will flow to line 2 of your 2023 IRS Form 8606.

It is recommended that you complete a draft version of IRS Form 8606 *before* you make a Roth conversion to more fully understand possible tax implications if you have $$ in a traditional IRA on December 31 of the year in which you do the conversion. Roth conversions can no longer be undone.

[Duckie]

I have now (March 2023) rolled over the IRA to a 401k, so the backdoor Roth should now work well

1) can I contribute to IRA & do a backdoor Roth now for calendar year 2022, or should I not because in 2022 I still had the IRA?

Yes. The fact that you had money in the TIRA 12/31/2022 does not matter because you did not convert in 2022.

2) backdoor Roth for 2023 should be fine for this year, I assume, even if the IRA was rolled over just 1 month ago?

Yes.

[sbb01]

Bogleheads forum is the best. Thank you all.