When should I NOT convert to a backdoor Roth IRA?

~ JFoxCPACFP

You should not put money in a backdoor Roth if:

  • You have pre-tax IRAs in your name. The reason is that the IRS’s “prorate” rule will cause part of the conversion to be taxed, which is a kind of double taxation.
  • You have not filled out all of the pre-tax retirement space available to you (unless you are in a low tax bracket in medical school or residency).

What IS a backdoor Roth IRA?

When should I convert to a backdoor Roth IRA?

5 thoughts on “When should I NOT convert to a backdoor Roth IRA?”

  1. Thank you for all of your helpful articles! I really appreciate the clear way you explain things. I have a couple of questions for you. I’d like to start doing a backdoor Roth IRA and possibly also a solo-401K as I do have 1099 income. However, I have $2800 sitting in a IRA rollover account from a 401K years ago. So I need to get that account cleared, right? Since it’s such a small amount, should I just roll it over into a Roth IRA? Or into my employer 401K? And should I do that before I start the backdoor Roth process, or can I do it all simultaneously?

    Thank you in advance for any insight you can provide?

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    1. Hi, Jenny,
      Thank you for the kind words. You are fine to do either. If you decide to convert to a Roth, you should clear your TIRA balance by 12/31 of the year of the backdoor Roth conversion. Since I am not privy to your tax bracket, I don’t have an opinion on whether you should convert to a Roth (pay tax on $2,800) or roll into your work retirement account (not taxed currently, but will be taxed along with earnings in the future). Of course, you should not convert to a Roth unless you have funds outside the Roth to pay the taxes.

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      1. Great! Thank you so much. Yes I am in a high tax bracket, so I guess there’s somewhat of an advantage to rolling into the 401K. And then I can start from scratch with creating the IRA-> Roth IRA conversion.One more question: I have heard you can do the Roth conversion up until the tax filing date, so theoretically I could still do it up until April 2020 for 2019 taxes, correct? Or would the money I had in the IRA as of 12/31/2019 mess up the pro-rata calculation and I should just wait until 2020? Thanks again!

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  2. You have until 4/15 to contribute to the TIRA (nondeductible) for the prior year. Conversions are reported on a calendar year basis and can be made any time you choose. So, if you make the conversion in 2020, you have until 12/31/20 to move the pre-tax TIRA balance.

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