@afromca wrote:
is the sequence of conversions important? I am in somewhat of a similar situation, although my spouse had some amount from a deductible IRA in 2012-14. We just converted it in late 2024 (moved money from traditional IRA to roth IRA), then started backdoor after that conversion towards EOY 2024. So once the first step is done, does the situation become cleaner? (meaning we owe tax only on the first conversion?). Thanks!
I'm not entirely clear because your facts may be different than the person you are adding on to.
Everything that happens in 2024 gets reconciled on a 2024 return, everything that happens in 2025 on the 2025 return, and so on. For a real backdoor Roth IRA to work, you need to end the year with zero balance in any traditional IRA accounts. But, remember that conversions happen when they happen, they are not back-dated like contributions sometimes can be. If we suppose you had traditional IRA funds and you did a full Roth IRA conversion in 2024, you would end up 2024 with zero basis and zero balance, and then you could do the backdoor in 2025, and you would pay tax on the pre-tax conversion amount on your 2024 return. But if you did all that in 2025, the result would be the same. You can contribute non-deductible funds for 2025, convert everything in 2025, you will pay tax on the deductible portion (same as you would in the other example) and you end 2025 with zero balance allowing you to go forward for 2026.
The only timing issue is that you want to do the traditional to Roth conversion pretty soon after the contribution, so you don't have to convert and pay tax on investment gains that happen between the contribution and the conversion.
