Q. Can I make a non deductible Traditional IRA contriburion (to a new or existing account) and then once the money clears, backdoor it to the existing Roth IRA? Would this be OK to do or is there a better way?
A. Yes. There is no "better way". That's how it's done. You do not need to open new accounts.
But this year's contribution cannot be converted in isolation (even if in a separate account) from any existing traditional (including rollover) IRA(s). It's best explained by example. Let's say you have a $95,000 balance in all your existing traditional IRAs and that balance consist of $45,000 in deductible contributions, $10,000 in previous non-deductible contributions and $40,000 in earnings (interest, dividends & capital gains). This year you make a $5000 non-deductible contribution and convert $5000 to a Roth. Only 15% of the $5000 conversion ($750) will be tax free. Your basis, in all your IRAs, is $15,000 (the previous $10,000 of non-deductible contributions plus this year's $5000 contribution). TurboTax will divide that $15,000 basis by the $100,000 balance ($95K+5K) to arrive at the 15% tax free ratio. This is the way the IRS requires it to be done. The calculations will be shown on form 8606.
References: http://www.bankrate.com/finance/retirement/drawback-one-type-roth-conversion.aspx
http://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html
https://ttlc.intuit.com/community/entering-importing/help/how-do-i-enter-a-backdoor-roth-ira-convers...
https://ttlc.intuit.com/community/retirement/discussion/back-door-roth-ira/01/2552058#M168628
