@bhJogdt wrote:
Good Morning, Since 2023 contribution is only non deductible,Could I withdraw 2023 IRA contribution and then convert into the 401k? If I withdraw $6500, is it going to be an issue ? if I am allowed withdraw do I have to amend tax return ? Thanks
No. All your IRA money is now co-mingled. Everything follows the pro-rata rule. If your combined IRAs are now 20% non-deductible and 80% deductible, every withdrawal, conversion and rollover will be 20% non-deductible money and 80% deductible money.
If you want to do real backdoor Roth IRAs in the future, you have to zero out your traditional IRAs. If you rollover the money to a Roth IRA, it will be mostly taxable (because most of the money was not taxed before). On the other hand, if you rollover all your combined traditional IRA funds to a 401k, then what will happen is the $6500 that was non-deductible in the IRA will lose the non-deductible designation, and become part of the general pre-tax 401k. You will then pay income tax on that $6500 when you withdraw it after you retire. Certainly, paying tax on $6500 in the future may be easier than paying income tax on $38,000 now. But you lose the advantage of making that non-deductible contribution.
The bottom line really is that once you mingled deductible and non-deductible funds in your IRAs, you can't just withdraw or rollover or separate the non-deductible funds.
