Author Topic: Side Husle SEP-IRA and Backdoor Roth. Help!  (Read 1510 times)

afuera

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Side Husle SEP-IRA and Backdoor Roth. Help!
« on: October 18, 2018, 09:57:53 AM »
One of my family members need a little help so I was hoping you fine folks answer some questions!
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Situation - fully maxing out pre-tax TSP contributions from day job - want to get some additional savings outside of workplace from side-hustle/extra investments.

2017 - open and contribute 900 to SEP-IRA - deducted on 2017 taxes
2018 - rollover 900+/- earning in SEP-IRA to existing TSP (this is the only existing pre-tax IRA account)
          - open and contribute 900 to solo-401k (new acct to avoid SEP to 401k conversion within 2 years 25% penalty)
          - open and contribute 6500 (over 50) nondeductiable tIRA and immediately convert to Roth


Specific questions:
Are amounts in Solo-401K excluded from Pro-rata?

Does rolling over the 2017 SEP-IRA - entire account balance in 201 negate the pro-rata rule for Roth conversions?  I believe so because Form 8606 line 6 asks for value of all traditional, SEP, and SIMPLE plans as of Dec 31.

Does this still give me a side-hustle 401k deduction with NO taxes due on the backdoor Roth?

MDM

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Re: Side Husle SEP-IRA and Backdoor Roth. Help!
« Reply #1 on: October 18, 2018, 11:14:37 AM »
Answer to all questions (assuming "201" means "2018") is "yes".

Not familiar with "SEP to 401k conversion within 2 years 25% penalty."  E.g., that is not indicated on https://www.irs.gov/pub/irs-tege/rollover_chart.pdf.

afuera

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Re: Side Husle SEP-IRA and Backdoor Roth. Help!
« Reply #2 on: October 22, 2018, 06:08:54 AM »
Thanks!  She has misread something but your post helped her figure out what it was.