I appreciate you taking the time to help me.
I waited until too late in the year to where I could empty the account before years end but roth converting it would've taken until the next year, muddying the waters for taxes. In hindsight, I should've done this sooner in the year and roth converted it. I was trying to get rid of all her traditional IRA money before 12/31/25 so the pro rata rule wouldn't force me to pay taxes on her backdoor Roth conversion. That appears to have worked.
However, I was expecting to pay the full 10% penalty on the $1030.61 withdrawn from the trad IRA. The math you presented makes sense in calculating how turbotax got to a $13 penalty, but shouldn't I have to pay more? Because by the end of the year, her $7000 trad IRA contribution (yes, nondeductable as above income limits - that's why we're doing backdoor roth) had already been converted to her Roth IRA. Why does the pro rata rule apply here (and actually save her money in penalties)? Also, if it's counting her roth money, why didn't it take into account the money that was already in her roth prior to 2025's backdoor roth conversion (~$25000)?
Does this make sense? I've read up a lot on this but still fairly new to the game and learning the fine details. Thanks
