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Backdoor Roth taxed? Non-deductible contributions to Traditional and backdoored. Basis entered. No distributions received. Roth taxed once enter total value of IRAs.

Traditional and SEP have pre-tax contributions in them. Basis tracked for non-deductible. Turbotax taxing almost entire backdoor Roth as if it was a distribution.
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2 Replies

Backdoor Roth taxed? Non-deductible contributions to Traditional and backdoored. Basis entered. No distributions received. Roth taxed once enter total value of IRAs.

"No distributions received."

In that case there is nothing to be taxed.

@jandjunified 

DanaB27
Employee Tax Expert

Backdoor Roth taxed? Non-deductible contributions to Traditional and backdoored. Basis entered. No distributions received. Roth taxed once enter total value of IRAs.

Yes, if you have pre-tax funds in one of your Traditional/SEP/SIMPLE IRAs on December 31, 2024, then the the pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part.

 

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.

 

@jandjunified 

 

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