Author Topic: IRA contributions for 2019 - backdoor ROTH implications in 2020?  (Read 180 times)

lulu0915

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Hello. We are about to make our IRA contributions this week for 2019. Before we contributed to a ROTH but for 2019 we were above the income limit so we need to do a traditional and then do a backdoor. A few questions:

1.  Does it matter if we do it all the same day?
2. Do I understand correctly that we can still do the backdoor but since its already 2020 we are taxed on any gain? I may not understand this correctly.
3. Is it better for the future to just do it in the same year and not wait until the next year? So for 2020 should we contribute to our traditional IRA in 2020 and do the backdoor conversion in 2020?

MDM

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Re: IRA contributions for 2019 - backdoor ROTH implications in 2020?
« Reply #1 on: March 18, 2020, 08:39:24 PM »
1.  Does it matter if we do it all the same day?
2. Do I understand correctly that we can still do the backdoor but since its already 2020 we are taxed on any gain? I may not understand this correctly.
3. Is it better for the future to just do it in the same year and not wait until the next year? So for 2020 should we contribute to our traditional IRA in 2020 and do the backdoor conversion in 2020?
1.  No, but the brokerage may require a day or two for the contribution to post before you can convert it.
2.  You are always taxed on any converted gain regardless of the year in which you convert.  The tax liability occurs for the tax year that matches the calendar year in which the conversion takes place.
3.  It's better in terms of being slightly simpler to file form 8606 which you should make sure you understand ASAP, preferably (but not required) before you do the contribution and conversion.

See Backdoor Roth - Bogleheads for more.