Listen to me discuss year-end tax planning with Brad and Jonathan on the ChooseFI podcast. The episode is available on all major podcast players, YouTube, and on the ChooseFI website (https://www.choosefi.com/year-end-tax-planning-2021-ep-351/).
During the conversation we referenced this blog post.
As always, the discussion is general and educational in nature and does not constitute tax, investment, legal, or financial advice with respect to any particular individual or taxpayer. Please consult your own advisors regarding your own unique situation. Sean Mullaney and ChooseFI Publishing are currently under contract to publish a book authored by Sean Mullaney.
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This post is for entertainment and educational purposes only. It does not constitute accounting, financial, investment, legal, or tax advice. Please consult with your advisor(s) regarding your personal accounting, financial, investment, legal, and tax matters. Please also refer to the Disclaimer & Warning section found here.
Hi Sean – thank you for this interesting and informative discussion. I’m one of the folks you referred to who will be unsure if AGI will exceed Roth limits before 12/31. You mentioned that there’s no harm in executing a backdoor Roth even if it later turns out you qualified for a direct contribution. More info on this would be appreciated. Would I have to do anything after the fact if it turns out I qualified to characterize it as a direct contribution? Would there be any functional differences in how the contributions are treated? Thanks in advance!
Diana, thank you for listening and commenting. I appreciate it.
While I cannot give you advice for your particular situation, I can say that those who execute a Backdoor Roth IRA during a year in which they otherwise would have qualified for a regular Roth IRA contribution do not need to do anything in addition to what is required for the normal Backdoor Roth IRA (such as the reporting requirements I’ve discussed often on the blog). Further, anyone executing a Backdoor Roth IRA should ensure that as of December 31st of the year of the Roth conversion step they have no balances in a traditional IRA, SEP IRA, and SIMPLE IRA.
In terms of how Roth conversions, particularly Backdoor Roth IRAs, are treated from a withdrawal standpoint, I’ve written about that issue here (https://fitaxguy.com/roth-ira-withdrawals/ specifically Example 4).