@crouse-house wrote:
I'm just discovering backdoor Roth conversions. So, I'm facing many years (~20 yrs +/-) of non-deductible IRA contributions (~$50,000 cost basis) that I'd like to convert to my Roth IRA and leave the earnings behind in the Trad. IRA. Can this be done in one fell swoop? Am I inviting an audit? Would TurboTax have all my old Form 8606's in my account history that I can retrieve? I've been using TT to do my taxes all that time, but only thought I needed to save my last 5-6 returns. Thanks!
No. You can't move just the non-deductible contributions, you have to use the pro-rata rule.
For example, if the IRA value is $200,000 and your non-deductible basis is $50,000, then ANY conversion will include 25% of the non-deductible basis and 75% of the pre-tax funds, so the conversion will be 75% taxable. If you convert $50,000, you would pay tax on $37,500, you would move over $12,500 of your non-deductible basis, and the other $37,500 on non-deductible basis remains behind in the traditional IRA for the next time you withdraw or convert.
A "backdoor" Roth only works as intended if you have no deductible funds in any traditional IRA. You would have to convert the entire traditional IRA at some point (all at once or in steps) and pay tax on it, then you could move forward with the backdoor Roth contributions as it is meant to work.
