DanaB27
Expert Alumni

Retirement tax questions

No pre-tax funds don't count for this question only after-tax would count towards the prior year basis.

 

But when you enter the value on December 31, 2022, you will have to include the value of all of your traditional/SEP/SIMPLE IRAs.

 

Please be aware, since you had pre-tax funds from your 401k rollover in your traditional IRA now the pro-rata rule applies. This means that with each distribution/ conversion, you will have a taxable and nontaxable part. You can see the remaining basis on line 14 of Form 8606, this basis can be carried forward. Therefore, each distribution/conversion in the future will have a taxable and nontaxable part until the basis is all used.

 

The Backdoor Roth only works if your traditional/SEP/SIMPLE IRAs are empty.  If you plan to use this strategy in the future you might want to think about a reverse rollover where you rollover IRA money to a company plan, like a 401(k). Only pre-tax funds can be rolled from an IRA to a company plan. Therefore, you would isolate the basis and could start the Backdoor Roth procedure fresh. But it only works if your employer allows it, not all plans do.

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