topic Re: Backdoor Roth Process ? in Deductions & credits

Backdoor Roth Process ?

cippy1025 — Thu, 18 Mar 2021 20:20:29 GMT

I wanted to make a $7000 Non-Deductible Traditional IRA Contribution (For Tax Year 2021) and then Covert that Traditional IRA to a Roth IRA so that it qualifies as a Backdoor Roth IRA. However, when I was logged into my Schwab Account, I accidently moved the $7,000 from my Checking Account Directly into my Roth IRA instead of moving it to the Traditional IRA Account first. Trying to understand How to Fix this. If it cannot be fixed then what do I do when I file my 2021 Tax Returns? How do Explain this to the IRS?. Wondering if I will be assessed any penalties? Or Best case scenario is that I may still be OK. Thanks in advance.

Re: Backdoor Roth Process ?

64dancer — Thu, 18 Mar 2021 20:34:45 GMT

I would call Schwab and tell them to move it back ASAP.

Re: Backdoor Roth Process ?

DavidD66 — Thu, 18 Mar 2021 20:38:34 GMT

I assume that the reason you wanted to do a backdoor Roth is because you don't qualify to make a Roth contribution. If that's the case, you should contact Schwab and tell them you need to undo the Roth contribution. Once that is done, you can go ahead and do the back door Roth. You should not just leave the funds in the Roth. If you are eligible to contribute to a Roth, there's no reason to do a backdoor version.

Re: Backdoor Roth Process ?

macuser_22 — Thu, 18 Mar 2021 20:43:39 GMT

According to IRS rules, you normally have 7 days to revoke a contribution without penalty. Call Schwab.