Second Backdoor Roth Conversion In Same Year Question

Forum|Forum|3 years ago
October 5, 2022
1 reply
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Hello. I requested to convert my entire traditional IRA to a Roth IRA (aka backdoor Roth). Because of a delay in processing, after the conversion there was $0.20 left in my traditional IRA. I believe $0.20 was interest that accumulated between time of request, and time of processing.

There are no "harmful tax implications" doing a second Roth Conversion for the remaining $0.20 correct? I have read there are no limits in the number of times one can do a Roth Conversion per year, nor any waiting periods in between conversions. Note I did not withhold any tax using traditional IRA funds for the first conversion, and do not plan to for the second.

Additionally, because I had a mix of deductible and non-deductible contributions in the traditional IRA, I believe it would also simplify tax return calculations if I convert the $0.20, rather than leaving it.

If there is anything I am overlooking please let me know. Thank you.

Not A Product Question

Best answer by dmertz

@Bsch4477 Understood, thank you.

I don't see why taking a distribution would be any simpler than converting it to Roth. The money has to move to a different account either way. There is no limitation on the number of Roth conversions one can do.

If the $0.20 distribution (not converted to Roth) is reported by the payer, being under age 59½ would require the $0.20 distribution to be reported on a Form 1099-R (code 1) separate from the one reporting the total of in-house Roth conversions (code 2).

Bsch4477

Level 15

Seems like it would be less complicated to just withdraw the 20 cents.

starkyfubbsAuthor

Level 5

@Bsch4477 Thanks, I did not think of this. But being under age 59 1/2, wouldn't I owe a 10% penalty on the $0.20 withdrawal? While the Roth conversion would be penalty free.

Granted the penalty would only be $0.02, which perhaps is so small it would not affect the tax return and I would not have to report it?