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josh_newton93489
Returning Member

I was hoping to ask a few questions regarding Recharacterization & Conversion of Roth IRAs.

In 2018, I recharacterized a 2018 Roth IRA contribution to a Traditional IRA and then followed that up with a conversion of 100% of the Traditional IRA back to a Roth IRA. I have no other Traditional IRAs. As a caution, I was advised by a financial advisor not to rollover any employer money as it was said that this could cause me issues on Form 8606. I assume they were talking about rolling over 401k money (for example) and I assume they meant moving that to Traditional IRAs or Roth IRAs. No problem, I have not done that. However, I was just curious what issues this person might have been concerned with. Any ideas? If you can specify line numbers on form 8606 where the issues would occur, that would be awesome.

As a follow up question, keeping in mind the recharacterization/conversion situation above, would it be okay to transfer a Roth IRA from one institution to another in 2019? This would be done via a direct institution to institution transfer. I would never touch the money. Basically, I just want to make sure, in light of my situation above, that I don't cause myself any issues by transferring my Roth IRA to another institution in 2019. I don't believe direct transfers like this are reported on any tax forms, but I wanted to check with you guys just to make sure. If I am wrong, can you tell me which form or forms this is reported on?

Finally, again keeping in mind the above (recharacterization/conversion & transfer of assets), do you see any issues with me continuing to do future backdoor Roths?

If this is too much to answer, don't worry about it. I understand. Thank you for looking.
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1 Best answer

Accepted Solutions

I was hoping to ask a few questions regarding Recharacterization & Conversion of Roth IRAs.

Ok ... lets start with the backdoor ROTH issue ... this ONLY works if you ONLY have non deductible contributions in the traditional IRA which is why you were warned to NOT convert the 401K yet.  If you had the year end value of all your IRAs would have to be listed on line 6 of the 8606 which means only a % of  the conversion can be non taxable.

Next  moving from one IRA custodian to another custodian thru a direct trustee to trustee transfer can be done anytime without consequences.

Then ... you can continue to do backdoor ROTH as long as you only have non deductible contributions  in all of your traditional IRA accounts. 

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5 Replies

I was hoping to ask a few questions regarding Recharacterization & Conversion of Roth IRAs.

Ok ... lets start with the backdoor ROTH issue ... this ONLY works if you ONLY have non deductible contributions in the traditional IRA which is why you were warned to NOT convert the 401K yet.  If you had the year end value of all your IRAs would have to be listed on line 6 of the 8606 which means only a % of  the conversion can be non taxable.

Next  moving from one IRA custodian to another custodian thru a direct trustee to trustee transfer can be done anytime without consequences.

Then ... you can continue to do backdoor ROTH as long as you only have non deductible contributions  in all of your traditional IRA accounts. 

josh_newton93489
Returning Member

I was hoping to ask a few questions regarding Recharacterization & Conversion of Roth IRAs.

Critter#2: Thank you very much for your detailed response to my questions! 🙂 So it sounds like the recharacterization/conversion that I did in 2018 will not negatively impact (in any way) my ability to 1) Move Roth IRA money from one institution to another in the future & 2) Will not impact my ability to do future backdoor Roths. Of course, with all of this, I would be keeping in mind your comments. I just wanted to make sure I was not missing any subtle tax "gotchas" with any of this. Does all of this sound good to you?

I was hoping to ask a few questions regarding Recharacterization & Conversion of Roth IRAs.

yep ... you got it.

I was hoping to ask a few questions regarding Recharacterization & Conversion of Roth IRAs.

This so-called “back-door Roth” method ONLY works if you have NO OTHER Traditional IRA accounts.  If you do, then the non-deductible part must be spread over ALL accounts and cannot be withdrawn by itself.  Only if you started with NO Traditional, SEP & SIMPLE IRA and ended up with a zero amount in ALL Traditional, SEP & SIMPLE IRA accounts will this Roth conversion not be taxable.


**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
josh_newton93489
Returning Member

I was hoping to ask a few questions regarding Recharacterization & Conversion of Roth IRAs.

Awesome. Thanks macuser_22 for your reply.
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