If $0 in current traditional/simple IRAs, but put $ in simple IRA later, can I backdoor now based on $0 in current accounts (ie. later simple IRA $ will not impact)?

Forum|Forum|6 years ago
June 7, 2019
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currently, there is no money in traditional and simple IRAs. If I contribute $ to the traditional IRA and backdoor convert to Roth right away, then start to contribute to the simple IRA, when it comes to tax filing next year, would I need to take into consideration the money in the simple IRA or still use the $0 at the time of the conversion? Thanks.

Richard

Best answer by dmertz

The 2019 year-end balance in your SIMPLE IRA must be included on 2019 Form 8606 line 6 when calculating the ratio of basis in your Roth conversion, making the Roth conversion partially (perhaps largely) taxable. The result will still likely be better than not doing the Roth conversion at all since future distributions from your regular traditional and SIMPLE IRAs will be partially nontaxable when distributed or converted later and money in the Roth IRA will grow eventually tax free instead of growing taxably in the traditional IRA.

D

dmertzAnswer

Employee

The 2019 year-end balance in your SIMPLE IRA must be included on 2019 Form 8606 line 6 when calculating the ratio of basis in your Roth conversion, making the Roth conversion partially (perhaps largely) taxable. The result will still likely be better than not doing the Roth conversion at all since future distributions from your regular traditional and SIMPLE IRAs will be partially nontaxable when distributed or converted later and money in the Roth IRA will grow eventually tax free instead of growing taxably in the traditional IRA.