Pro-rata rule - backdoor roth

[tims3]

I was not aware of Pro-rata rule for Backdoor roth IRA conversion. I have traditional pre-tax IRA account. I opened new IRA account specifically for after-tax contributions and shortly after contribution converted it to roth IRA. I am filling out taxes now and realizing that there is pro-rata rule and turbotax is calculating that majority of my conversion is taxable as i had a significant amount in my traditional pre-tax IRA. What are my options now? Does it make any difference that i had a separate account for pre-tax money? Is anything can be reversed for 2025? Subsequently i made another contribution in 2026 and converted it as well. Anything can be changed for 2026? Thanks you!  

[DavidD66]

No, you cannot reverse (or "recharacterize") a Roth IRA conversion (Backdoor Roth) that took place on or after January 1, 2018. The Tax Cuts and Jobs Act of 2017 eliminated the option of reversing these conversions. The conversion is irrevocable once completed. This applies to both conversions from traditional IRAs and in-plan conversions (such as from a 401(k)).  The fact that you had a separate account for pretax contributions has no impact.

[dmertz]

"What are my options now?"

There is only one option:  Include in your taxable income the taxable amount determined on Form 8606.

"Does it make any difference that i had a separate account for pre-tax money?"

No.  All of your traditional IRA accounts are treated as a single combined account for this purpose.

"Is anything can be reversed for 2025?"

No.  The Tax Cuts and Jobs Act of 2017 eliminated recharacterizations of Roth conversions.

Subsequently i made another contribution in 2026 and converted it as well. Anything can be changed for 2026?

The 2026 Roth conversion cannot be undone.  However, if you have an employer plan such as a 401(k) that will accept the rollover of the pre-tax money in your traditional IRAs, you could do such a rollover to reduce or eliminate your 2026 year-end balance in traditional IRAs.

[tims3]

Thanks for responses. Makes sense for 2025. Don't understand your response for 2026. If i move all money from traditional IRA to 401k, then 2026 conversion should be non-taxable, right?

[PatriciaV]

The option provided by dmertz would reduce or eliminate the balance in your traditional IRA(s), which may influence the taxable income calculations.

[dmertz]

"If i move all money from traditional IRA to 401k, then 2026 conversion should be non-taxable, right?"

Correct.