Backdoor Roth Conversion Tip [video]

transcript

I recommend doing the Roth Contribution and Roth Conversion in the same calendar year.

This is why - when you do an IRA contribution, it generates one tax form. When you convert to a Roth IRA, it generates another tax form. If you do the contribution and conversion in the same calendar year you will get both of those tax forms at the same time to put on one return.

When you do a Roth Contribution and Roth Conversion in different calendar years, you report that one transaction over two returns. It gets confusing.

If you do the contribution in 2025, for example, for the previous year, which is valid as long as you do it within the dates required, and then you do the conversion right after in 2025, you are now reporting that conversion over two separate tax years. The 2024 return has to show the IRA contribution and then the conversion is going to show in 2025. Acceptable - just a little bit more messy. I've seen people get tripped on up on it and have to amend their tax return.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.