Hi,
I have a existing SEP and want to do a backdoor Roth IRA. If i roll the SEP into my employers 401K plan at that point i will no longer have any other IRA. Am i able to do the traditional IRA with after TAX dollars to Roth conversation without any taxable penalties sine there is no other IRA?
thank you
allen
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Yes as long as the total IRA value of all Traditional, SEP, or SIMPLE IRA accounts is zero as of Dec 31 of the year that the conversion occurs.
Yes, you need to rollover the SEP funds to a qualified plan in order to avoid "spreading" the conversion across your SEP plan and the non-deductible IRA basis. This is critical to the backdoor Roth conversion strategy.
The IRS allows you to combine money in a SEP IRA with money in a 401(k) plan, either by moving the SEP IRA money to the 401(k) or the 401(k) money to the SEP IRA. Since both accounts offer pre-tax savings, you won't pay any taxes when you move the money.
However all of it is taxable if you do a ROTH conversion... it is not a "back door" event in any way. So if you want to convert from the Sep to the Roth directly the tax liability is exactly the same as a SEP to 401K to Roth path.
Yes as long as the total IRA value of all Traditional, SEP, or SIMPLE IRA accounts is zero as of Dec 31 of the year that the conversion occurs.
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