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IRA-to-Roth conversion + later non-deductible IRA contribution

Hi,

I had a traditional IRA account (was a rollover from previous employer's plan) that I converted to a Roth IRA in 2013. The intent was to pay taxes on conversion amount, and also to empty the IRA of all amounts that were not non-deductible. Later in 2013, I opened a separate traditional IRA account and made a non-deductible contribution.

Now that I'm preparing my 2013 return, it seems like I am essentially forced to consider part of the Roth conversion as non-taxable so that only a partial basis remains in my new traditional IRA account.

It may sound silly, but for simplicity, I would prefer to pay now the taxes on the entire Roth conversion amount, leaving all of my basis in the new traditional IRA (that was created after the conversion). Is there any way to accomplish this, given that 1) the Roth conversion happened well before the non-deductible traditional IRA contribution, and 2) the non-deductible contribution was made to a newly created traditional IRA account after the original was closed?

Why is it so hard to pay my fair share upfront? ;)

Thanks, Pedro

Reply to
Pedro
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I was kinda curious about the same general area.... timeline of Roth vs Traditional...

My wife has a Traditional IRA with all non-deductible contributions. SO - when and how to convert to Roth in same year, AND also make a contribution to "something" in the same year ? A - make non-deductible contrib to IRA and then convert all to Roth B - convert existing to Roth and then contrib to Roth for this year

Reply to
ps56k

The rules don't care about the timing in a year. Your mistake was opening another traditional IRA. It is too late to perform another conversion. Therefore, there is only one possibility (slim at best):

  1. If your income is below the limit for making Roth contributions, have the trustee recharacterize the contribution to a Roth. The deadline is 4/15/14.

I say "slim at best" as I am guessing that you probably made the IRA contribution rather than a Roth contribution because your income was too high.

Reply to
Alan

Hi Alan,

I was afraid that's the case. Thank you for confirming though.

-Pedro

Reply to
Pedro

I was afraid that's the case. Thank you for confirming though. ======= I agree with Alan's analysis.

1) One can't contribute to a traditional IRA in the same year as a conversion without affecting the computation of the conversion. 2) Recharacterization or complete reversal of the contribution are the only fixes you have.

Had you contributed first then immediately converted, the problem would have been avoided.

In future years, consider immediately converting the non-deductible contribution of the traditional IRA if you are above the Roth IRA threshold to contribute directly.

Reply to
D. Stussy

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