Back Door Roth

[peauff]

My client contributed to a Roth IRA in February of 2022, and then realized that because she would be filing MFJ (she married in 2022) she would be over the Roth income limits.  She then immediately withdrew this contribution (there were no earnings on the contribution).   She had no other IRA accounts.  In February of this year, she contributed this same amount to a non-deductible IRA, and plans on converting this to a Roth under a back-door Roth scenario.  My understanding is that we need to report the non-deductible IRA contribution on her 2022 return, Lines 1,3, 6 and 14 of form 8606.  The conversion will be reported on her 2023 return, after receipt of the associated 1099.  Just want to confirm.  

[qbteachmt · Accepted solution]

A backdoor Roth is no different than a Conversion. It becomes "backdoor" when the person nearly immediately contributes and converts, and because the contribution (to Trad IRA first) is non-deductible, it is all Basis. As such, it converts to Roth as basis there, and there is nothing to tax (if you really have no earnings) and there is nothing to tax pro-rata (if you have no other accounts whose balances and basis would need to be taken into consideration).

I would confirm which year that contribution was tagged with.

The "backdoor" conversion is a 2023 event.

"In February of this year, she contributed this same amount to a non-deductible IRA, and plans on converting"

And that's how they end up with taxable earnings. That delay, right there.