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IRS "unlocks the back door"
07-14-2018, 07:12 AM
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#1
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Recycles dryer sheets
Join Date: Mar 2017
Posts: 199
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IRS "unlocks the back door"
According to Forbes, the IRS has basically greenlit the backdoor Roth contribution.
Quote:
Donald Kieffer Jr., a tax law specialist with the IRS’s Tax-Exempt and Government Entities Division, gave the Back-Door Roth IRA it’s biggest vote of confidence yet.
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Quote:
i think the IRS’s only caution would be whenever we see words like ‘back door’ or ‘workaround’ or other step transactions that are putatively enabling a way to get around limits – especially statutory contribution limits – you generally find the IRS is not happy and prepared to challenge those,” Kieffer said. “But in this one that we’re talking about, it’s allowed under the law.” (emphasis added)
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No reason given why this step transaction is special.
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07-14-2018, 11:04 AM
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#2
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Full time employment: Posting here.
Join Date: Jul 2014
Posts: 859
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07-14-2018, 02:34 PM
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#3
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Full time employment: Posting here.
Join Date: Feb 2008
Posts: 748
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I have been doing it for years, back when they took the income limits off in 2006. Was their talk of closing it off?
__________________
I don't want to spend my entire life at work. I deserve more. - Want2retire aka W2R
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07-14-2018, 04:55 PM
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#4
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Full time employment: Posting here.
Join Date: Sep 2016
Location: Way up North
Posts: 561
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Quote:
Originally Posted by Ronnieboy
I have been doing it for years, back when they took the income limits off in 2006. Was their talk of closing it off?
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+1
I started doing "backdoor" Roth contribution in 2010 and thought I was a late adopter. Initially I was careful to wait a couple months and pay taxes on some gains to avoid the appearance of step transactions. The last few years I just let 'er rip and convert the day after the deposit.
The "backdoor" Roth and the "mega-backdoor Roth" are both maneuvers I use and appreciate, but they have me scratching my head over why the subterfuge is required. Why not do away with the pro-rata rule and income limits on Roth contributions and raise the Roth contribution limit on 401Ks? Dunno
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07-14-2018, 05:35 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,184
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From what I was told here, and verified, 2010 was the first year the income limit for Roth conversions was removed. Maybe there was some other way in 2006, or raised limits.
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07-17-2018, 08:30 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Sep 2007
Posts: 1,195
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Because of the pro-rata rule, backdoor Roth generally doesn't make sense if you have any significant amount of money in your regular IRA(s).
"The Pro-Rata Rule: A Backdoor Roth Land Mine"
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07-17-2018, 08:42 PM
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#7
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Full time employment: Posting here.
Join Date: Mar 2004
Posts: 526
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Quote:
Originally Posted by rayvt
Because of the pro-rata rule, backdoor Roth generally doesn't make sense if you have any significant amount of money in your regular IRA(s).
"The Pro-Rata Rule: A Backdoor Roth Land Mine"
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I confess that Roth conversions are only a recent interest of mine; I'm interested in this issue. Was that supposed to be a link? It doesn't click . . .
Thanks in advance, Ray, from a fellow Vermonter
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07-18-2018, 03:55 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Mar 2014
Location: Dallas
Posts: 1,148
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Pro-rata rule can bypassed easily by transferring the entire pretax IRA balance to 401K account which most people should have if they are exploring backdoors.
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07-18-2018, 04:30 AM
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#9
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gone traveling
Join Date: Mar 2015
Posts: 3,508
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Quote:
Originally Posted by trumpeting_angel
I confess that Roth conversions are only a recent interest of mine; I'm interested in this issue. Was that supposed to be a link? It doesn't click . . .
Thanks in advance, Ray, from a fellow Vermonter
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https://blog.foxwealthmgmt.com/2017/...oth-land-mine/
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