@techie353 wrote:
Thank you all for assisting!
@DanaB27
@dmertz
@macuser_22
@Opus 17
All you mentioned from items 1-4 is correct. Now that I have requested recharacterization of my Roth contribution as a traditional IRA, can I convert this as a Roth contribution for 2021 using Backdoor Roth? I am assuming if I can, I incur no additional taxes. If I cannot, it is still nondeductible traditional IRA and will I incur additional taxes?
[See correct answers below]
Assuming you leave the recharacterization as-is, the results are as I already described. You will have to account for the non-deductible basis in your IRA when you report the rollover. Remember that with the recharacterization, the rollover happened after the non-deductible contribution but you did not rollover your entire IRA balance (because your IRA balance now includes the recharacterized amount as of the date of the contribution). Part of your non-deductible basis will go into the rollover and disappear, resulting in some double taxation when you eventually withdraw from the 401(k).
Then, you will have a regular IRA with a smaller (partial) non-deductible basis. The non-deductible basis in your IRA at the end of 2021 will be calculated on form 8606. If you convert it a Roth IRA in 2022, the non-deductible basis will be non-taxed but the rest of the conversion will be taxed like a traditional IRA to Roth conversion. So it won't really be a "backdoor Roth".
