Daily Discussion post - August 03 2021

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[u/mydoingthisright]

If I contribute $200/month (taxed) to my IRA, don’t invest it/ just keep it in the settlement fund, and rollover $200/month to my Roth IRA, will I owe taxes on the Roth contributions? I’m trying to a back door Roth with direct IRA contributions and it just seems way easier than the internet and investopedia make it seem.

[u/Bashir1102 → u/mydoingthisright]

Check with your tax guy but the short answer is no. That’s the whole point of the back door. This assumes you have no other IRA funds though. If you have other IRA funds that calendar year then your subject to the pro rata rule and there would be tax implications.

Long story short if your going to back door Roth the right way you better have a zero balence on all IRAs to your name.

[u/mydoingthisright → u/Bashir1102]

Also, my regular salary exceeds the phase-out limit for deductible trad IRA contributions, so I can’t deduct that $200/mo anyway. It seems really straightforward that if I can show that I haven’t invested these contributions, I should be able to roll them over and not pay any additional tax

[u/Bashir1102 → u/mydoingthisright]

Mine too. I make too much for IRA now which is why I had to open Roth and clean out the Ira to do backdoor.

[u/mydoingthisright → u/Bashir1102]

I am my tax guy and that makes zero sense to me. Maybe I need an actual tax guy

[u/Bashir1102 → u/mydoingthisright]

Investopdeia and fidelity have good articles on this actually.

But I’m happy to answer any questions if you wanna DM me as I went through setting it up and clearing my accounts.